Healthy Competition

Samsung Electronics is paying keen attention to the impact of phone-based payment service Apple Pay on the simple payment market following its launch in Korea. This is because the Apple iPhone’s share may grow in the Korean smartphone market as Apple Pay will compete with Samsung Pay, which has appealed to consumers in Korea as a popular simple smartphone-based payment method.

Apple officially launched Apple Pay in Korea on March 21. It enters Korea nine years after being introduced to the world in 2014.

Samsung Pay appeared in 2015, took the top spot in the Korean offline simple payment market, and is now facing its archrival. Accordingly, Samsung Electronics has set up an Apple Pay response team internally and is closely monitoring Korean consumers’ responses to Apple Pay.

The hottest issue is whether or not Galaxy smartphone users will switch to iPhones. People must use an iPhone to use Apple Pay. In the end, if Apple Pay succeeds, it will lead to an increase in the iPhone's market share in the Korean smartphone market.

Until now, Samsung Electronics' Galaxy smartphones have a 70 to 80 percent share of the Korean smartphone market, dwarfing the Apple iPhone’s share (20-30 percent). Many analysts say that the Galaxy’s convenience function called Samsung Pay plays a big role in enabling the Galaxy to enjoy a market share bigger than that of the iPhone in Korea.

Now the iPhone can seek to expand its market share with Apple Pay front and center. However, Apple Pay is faced with a low penetration rate of near field communication (NFC) terminals in Korea, which are essential to its use. Currently, Korea’s NFC terminal penetration rate is standing at only 10 percent.

Also, unlike Samsung Pay, which charges no service fee, Apple Pay receives fees from affiliated card companies, which is also considered a barrier against Apple Pay’s popularization in Korea. The Apple Pay service fee that Apple receives in the United States is known to be up to 0.15 percent per transaction. In the end, it raises concerns that fees will affect the profits of credit card companies which will then pass the burden on to consumers.

Meanwhile, some errors, such as connection failures, have already occurred with the use of Apple Pay even though it only started service yesterday. The main reason for this is the common enough phenomenon where too many users crowd a service at the start. Hyundai Card is known to have prepared for the launch of Apple Pay while expecting that 1.5 million people will register on the first day. Experts say that the server became unstable when a lot of people used it quickly, since its launch had received a lot of attention.

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