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What’s the price of competing with Apple, Google and PayPal in mobile payments? For Samsung, about $250 million.
That’s about how much the Korean phone maker spent earlier this year to acquire LoopPay, a Massachusetts-based startup whose technology will be used in the Samsung Pay mobile payments system when it launches later this year, according to multiple sources. With earnouts, that number could rise based on executive or company performance. The terms of the earnouts are not known.
A Samsung spokeswoman and LoopPay CEO Will Graylin both declined to comment.
LoopPay invented a technology that originally allowed shoppers to pay for purchases in stores by placing a special piece of hardware — such as a fob or a smartphone case — near where you would normally swipe a credit card. With the acquisition, Samsung is embedding the LoopPay technology into its new phones, so shoppers can tap and pay with a new Samsung Galaxy 6 rather than whipping out a credit card or cash.
The plan is for Samsung Pay to work at the vast majority of U.S. stores since LoopPay’s technology mimics a card swipe, meaning it should work just about anywhere shoppers can currently pay with a credit or debit card. That’s different from how Apple Pay and Google Wallet work, both of which require a store to have upgraded its checkout equipment to work with a technology known as near field communication or NFC.
Since NFC adoption is growing in stores, Samsung has said Samsung Pay will also be compatible with that technology. It’s not yet clear how Samsung’s NFC implementation will work on Android phones in the U.S., where Google and the major wireless carriers are partnering to pre-load Google Wallet onto the phones.
What’s at stake? The big tech companies and carriers seem convinced that our phones will eventually replace our wallets. For phone makers like Samsung, that could make mobile wallet technology table stakes over the next few years as they compete for consumers.
Retailers like Walmart are also taking notice, creating a consortium that is developing its own mobile payments app called CurrentC. Earlier this year, PayPal spent about $280 million to acquire a startup, Paydiant, which makes the mobile wallet technology on which CurrentC is built.
LoopPay had raised more than $10 million from investors, including Visa.
This article originally appeared on Recode.net.
