Samsung Electronics has acquired LoopPay, a U.S. mobile payments firm that could help it counter the Apple Pay mobile payments system.
LoopPay produces small add-on devices for smartphones that can transmit credit card information in conjunction with a mobile app. When the devices are held within a few centimeters of a traditional magnetic strip reader, the information can be sent wirelessly to make a payment.
LoopPay's Magnetic Secure Transmission (MST) technology creates magnetic fields that simulate those generated with a magnetic strip, and effectively turns card readers into contactless payment devices without modifications.
The approach differs from that of NFC (near field communication) used in Apple Pay, which requires retailers to have contactless payment terminals that can accept NFC signals.
Massachusetts-based LoopPay claims its solution can work at about 90 percent of point-of-sale terminals in the U.S., which would give Samsung an advantage in mobile payments.
"NFC is currently only available in less than 10 percent of U.S. retailers despite NFC's mobile launch almost a decade ago," a Samsung spokeswoman said via email. "MST solves the merchant acceptance issue that has prevented other mobile wallet solutions from reaching mass adoption."
While LoopPay doesn't require merchants to upgrade their checkout devices, it requires extra hardware for users -- a card or fob, small rectangular devices that can attach to a smartphone either by themselves or in a phone case. Apple's NFC mobile payments technology, on the other hand, is housed in the iPhone 6 and the Apple Watch. Apple Pay also works with apps on certain iPads.
One of LoopPay's products is a US$59 smartphone case that incorporates the card and can also house drivers' licenses and other IDs. The idea is for users to leave their wallets at home, so all they have to carry is a smartphone.
Samsung said LoopPay's executives will work closely with its mobile division, suggesting the technology could be incorporated into Samsung devices. News reports have speculated that its upcoming flagship Galaxy S6 smartphone could have a new mobile payments technology when it is unveiled at Mobile World Congress next month.
The Samsung spokeswoman would only say that "details on device integration" would be announced in the near future.
Apple CEO Tim Cook recently said that out of every $3 spent at stores with contactless payment, $2 was spent with Apple Pay.
Tim Hornyak covers Japan and emerging technologies for The IDG News Service. Follow Tim on Twitter at @robotopia.