Samsung's LoopPay: What it is, and why you should care

LoopPay is a mobile-payment system that could power Samsung's smartphone transactions in the future. Here's what we know so far.

CNET

Samsung just made a big move in mobile payments.

The world's largest smartphone manufacturer said on Wednesday that it had acquired LoopPay, a mobile-payments technology startup.

The deal potentially supercharges Samsung's ability to enable its customers to pay for goods and services with their smartphone, a feature that has generated more interest since Apple introduced its Apple Pay system. But Samsung has dabbled in mobile payments before -- years before Apple Pay. So what's different about LoopPay, and does it have a chance to be more successful?

I played around with LoopPay's technology going back to last year, and have spoken with LoopPay's executives on multiple occasions about their product. Here's what to know, so far, about what it is and what it might mean for Samsung.

What is LoopPay right now?

LoopPay started as a basic snap-on mobile wallet device for the iPhone. Currently, it takes the form of a card case that holds a little, battery-powered plastic puck inside. The LoopPay CardCase has a slide-out puck with a magnetic loop in it that can mimic a regular credit-card swipe when placed up against any regular credit-card terminal. LoopPay also has a standalone fob meant to be used like a keychain. To load credit cards into your LoopPay accessory, you use an included Square-type card swiper. Once the cards are loaded in, you can hold LoopPay up to any swipe terminal, press a button (or select a payment method in the app), and a payment goes through.

LoopPay works at any regular credit card terminal?

I tried using LoopPay's newest CardCase around town at every little newsstand, bodega and store I could find, and it really does work. But the current hardware is creaky and awkward. Also, the plastic puck -- a bit like Coin, another method of storing credit cards on a payment device -- needs to be recharged.

It works with nearly any swipe-type card...for now

LoopPay's mobile-wallet app and included card-swiper accessory recognizes credit cards, loyalty cards, gift cards and just about anything else in between, and loads them into the app and hardware. A retailer may still find LoopPay weird and ask for your credit card and ID just in case, but being able to load in lots of different types of cards is pretty cool. LoopPay allows one card to be locked in as a default payment method, with others you can pick from via the app.

Is it instant?

Unlike Apple Pay's simple hold-up-to-the-terminal-and-scan-your-fingerprint system, with LoopPay you either need to press a physical button on the back of the LoopPay case to send the virtual swipe through, or initiate it in the app once the case is paired via Bluetooth. It's still pretty easy, though. But the tech in current cases from LoopPay may not reflect what's to come.

How secure is it?

Right now LoopPay uses your actual credit card number, versus the "token" Apple Pay uses to hide your actual information. Your credit card data, according to LoopPay, is stored via a secure element on the accessory, but part of your account is also stored in the cloud on a secure server. Setting up an account involves an identity confirmation, and credit card info is bonded just to a particular phone and accessory. Down the line, LoopPay could work using fingerprint scanning, like Apple Pay does.

In the future, it could work like Apple Pay via NFC

I've talked with LoopPay's executives several times, and they've promised that the magnetic loop technology, in a lot of ways, is like a Band-Aid: it enables payment at places that don't have contactless payment technology called NFC, or near-field communication. Right now, LoopPay just scans cards right to a digital wallet on your phone, but you could eventually set up banks to authorize LoopPay much like Apple Pay does. That's not here yet in the CardCase I tested. But Samsung's phones have had NFC for years, and it seems very likely that LoopPay will work via a hybrid of NFC and magnetic loop tech to work at as many stores and places as possible.

LoopPay will work at future EMV chip-based credit-card terminals

Those old magnetic-stripe swipe terminals will be going away, eventually, to be replaced by EMV (EuroPay, MasterCard and Visa) terminals, which work with cards that have an embedded chip. According to LoopPay CEO Will Graylin, LoopPay's technology is set to work at these new terminals.

Will all your loyalty cards and gift cards work with it down the road?

It's hard to tell. LoopPay will be making a transition, eventually, from "self-provisioning" mobile payments (right now, you swipe and store your card locally) to "remote provisioning," which allows a bank to authorize your phone or device with a credit card token, like Apple Pay. Lots of cards can swipe into LoopPay now, including loyalty cards and gift cards that don't work with Apple Pay. Will that all work with Samsung's LoopPay-based tech down the road if remote provisioning becomes part of the plan? It's not clear: if the method of authorizing payments shifts, then that could change whether it works with all your loyalty cards.

LoopPay could be built in to a phone

These bulky cases aren't where Samsung wants to go with LoopPay, obviously: the tech could be, and likely will be, built in to phone hardware. Maybe a magnetic loop and NFC combined, allowing for a hybrid way of making payments at a greater range of places. Samsung has told CNET that LoopPay's technology could be combined with Samsung security on a phone, and other features might be added too. Odds are that what LoopPay is now might be different from what it becomes down the road. Will it show up in some form on the Samsung Galaxy S6 ? We'll have to see.

Will this tech be limited to Samsung products?

LoopPay started by making phone accessories, including ones for the iPhone. Now that Samsung owns LoopPay, will that end? LoopPay executives have suggested the tech could end up in other manufacturers' products, but there's little we know now about how that might change.

Will this show up in Samsung wearables and smartwatches?

There's a good chance this could happen, especially since it will give Samsung a chance to compete with Apple in wearable mobile payments. Apple Watch will work with Apple Pay via NFC. LoopPay, meanwhile, could enable something similar for wearables like smartwatches. LoopPay's system already uses a detachable battery-powered "fob" that's authorized to make payments over a span of time before deactivating, like a valet key for paying for stuff (for example, you could hand the fob instead of your credit card to a waiter at a restaurant). On the existing LoopPay card cases, the fob detaches from the case and can be used for standalone payments. But that little payment fob could be built in to a keychain, a band or a smartwatch. The only problem is that this payment tech would have to work in close range.

Stay tuned for Mobile World Congress in Barcelona, where we're bound to hear more about Samsung's newest mobile-payment tech.

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