PayPal Is Using Samsung's Pipeline to Pump Out New Payment Tech

After every major Samsung product unveiling this week, PayPal was quick to say: we have an app for that.

"With customers using mobile devices more and more every day, it's critical for us to innovate in the payments space," says Stacy General, a PayPal customer experience advocate. "At the end of the day, it's about making it easier for consumers to pay."

Samsung's upcoming products include the Galaxy S5 smartphone and a redesigned Gear smartwatch. With the Galaxy S5, PayPal will support fingerprint authentication as an alternative to passwords. With the Gear 2 smartwatch, PayPal will allow consumers to manage their accounts, redeem offers and authorize payments from their wrists.

The fingerprint technology is more of a near-term move, General says.  PayPal is already a member of the FIDO Alliance, a cross industry group working to reduce reliance on traditional passwords. Using fingerprints as an alternative would appeal to consumers, she says.

"People don’t like to remember their password and type it into a keypad area" on a smartphone, General says.

But PayPal's embrace of the Gear 2 smartwatch will generate buzz around PayPal as an innovator, says Ron Shevlin, a senior analyst at Aite Group.

There isn't a near term market for wearable computing, Shevlin says. "That said, PayPal's initiative with Samsung is an interesting experiment, and probably does more to enhance their image and branding as a technology leader than it does to drive transactions and revenue," he says.

The appetite for smartwatches may increase when Apple unveils its long-rumored iWatch, says Daniel Van Dyke, a research specialist at Javelin Strategy & Research.

"Samsung is hot—24% market share compared to Apple's 40%. But only Apple opens the floodgates for adoption," Van Dyke says.

As such, PayPal is using Samsung to position itself for future adoption, Van Dyke says. "It's smart because when Apple releases its smartwatch, if PayPal has a killer mobile payments app, Android users will demand the same," he says.

Consumer adoption of new technology, such as tablets or smartphones, is followed by payment transactions executed on the devices, Van Dyke says. "The same could be expected in mobile proximity payments through wearables, a couple of years down the line. So PayPal will have worked out any issues with their wallet by then, have superior product and be best suited to gain adoption," he says.

A number of payment companies are also dipping their toes in wearable computing. LevelUp, Zooz and shopkick are working on payments uses for Google Glass, which displays information on a small screen above the user's right eye. MasterCard is also working to combine Google Glass with its MasterPass digital wallet and with QkR, a MasterCard mobile app that enables payments via QR codes and other means.

At this point, PayPal sees the Gear 2 app as a venue for multi-channel shopping.

"You can have the Galaxy S5 in your [handbag] and are wearing your [smartwatch], and check in and pay that way," says General, who would not comment on PayPal's plans for wearable computing apps for other systems.