November 28, 2024

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An image of Samsung Pay's partnership with Naver Pay (Samsung Electronics)

As IT behemoth Apple will likely launch its mobile payments service Apple Pay in Korea next month, Samsung Electronics appears to be reacting to the rival’s move by strengthening its digital payment service Samsung Pay through a strategic partnership with internet giant Naver.

Samsung announced Monday that it signed a partnership agreement with Naver Financial to promote its mobile payment system, making digital payments more convenient for its users. Samsung has gained a stronger online presence here through the network of Naver Pay, the country’s second-largest mobile payment provider.

Samsung has teamed up with Naver to compete against Apple Pay, while the long-awaited mobile payment service of its archrival Apple looks to make its debut here as early as next month. Samsung has enjoyed a dominant position in the market for years, but the company’s concerns are growing that users of its Galaxy smartphones may switch their phones to iPhones following the launch of Apple Pay.

Launched in the United States in 2014, Apple Pay allows users of Apple devices, including the iPhone and iPad, to make payments in person without plastic cards. It is available with select terminals using the near-field communication, or NFC, system, a short-range wireless protocol.

It became the second-most popular digital payment system around the globe with a total of over $6 trillion worth of transactions for 2021, following Visa with $10 trillion. Meanwhile, the transactions made through Samsung Pay stood at $200 billion in the same year, according to data from market researcher Statista.

Samsung Pay, which is based on magnetic secure transmission, or MST, technology, has been the most-used financial services app in Korea with 16 million users as of November, according to data from Mobile Index.

Apple Pay (Apple Pay website)

Ahead of the long-awaited Korean debut of Apple Pay next month, Samsung Pay appears to be bolstering preparedness by teaming up with its national rival Naver Pay.

Samsung Electronics said Monday that it has signed a partnership deal with Naver Financial, the operator of Naver Pay, to seek business synergy between the two popular payment services. It was a rare collaboration considering the tech giant works with Samsung-affiliated financial companies.

The latest deal is considered a win-win for both companies. Samsung Pay, the market leader in offline payments, will work at some 550,000 online stores on Naver, while Naver Pay, the No. 1 player in online payments, will use the extensive offline service networks of Samsung Pay.

Samsung, in particular, is expected to see a big boost in user numbers considering Naver Pay’s whopping 35 million members.

Apple Pay has been out of reach of local iPhone users due to the strong dominance of Samsung smartphones and a lack of technological infrastructure for NFC payment, but it recently obtained approval from the Financial Services Commission to roll out the service. Apple looks to introduce the digital wallet in partnership with Hyundai Card but the service's launch date has not yet been disclosed.

Apply pay poses a threat to Samsung since an increasing number of Generation Z Galaxy users say they will switch their smartphones to iPhones after the launch of Apple Pay. A recent survey conducted by Vinu Labs showed that the percentage of young Galaxy users who sought to become iPhone users in the future increased by 10 percentage points to 36 percent.

According to the market research firm Counterpoint Research, Apple replaced Samsung as the top smartphone player around the globe in the fourth quarter of last year, driven by the launch of the iPhone 14 series. Apple logged a global market share of 23 percent in the September-December period, followed by Samsung with 19 percent.

In the meantime, other data from Counterpoint Research showed that Samsung smartphones took up 83 percent of the local smartphone market in the third quarter, while Apple accounted for 13 percent.

Local industry circles are paying keen attention to whether Samsung will keep its position as a dominant player with its digital payment service here even after the launch of Apple Pay.

"Samsung is trying to prevent Apple Pay from expanding," an industry official said on condition of anonymity. "Once Apple Pay launches its domestic service, it is likely to have some impact on the market share here."

Another industry official told The Korea Herald that Apple may attract local users through marketing aimed at the growing number of young domestic iPhone users. However, since Apple Pay will not support services such as transportation payments for a while, its impact on the local market will be "limited in terms of convenience."

Counterpoint Research also said in a report that Apple Pay is unlikely to make a significant difference to the smartphone market in Korea. Apple Pay may attract a lot of attention in the early days of its introduction, but few people will change their devices because of the service, the report said.

By Jie Ye-eun (yeeun@heraldcorp.com)