* Samsung launches mobile payment in Singapore, Australia
* Samsung takes no fee, hopes the service to boost hardware
sales
* Apple, Samsung's payment services available in 6 countries
* Their mobile transaction value remains fraction of total
market
By Matt Siegel and Se Young Lee
SYDNEY/SEOUL, June 22 (Reuters) - Smartphone leader Samsung
Electronics 005930.KS has for years been a spectator as Apple
AAPL.O built a services "ecosystem" supporting its products.
But now, as the two develop the market for mobile payments, the
Korean tech giant is taking the fight to its U.S. archrival.
For Apple, offering users the ability to tap their iPhones
on sales terminals to buy a coffee, snack or train ticket is a
fresh revenue stream, like its iTunes music and entertainment
service. The banks it works with cough up a small charge for
each transaction - reportedly 0.15 percent in the United States.
Samsung, which has trailed behind its competitors in
software and services, is taking a different path.
It is not seeking fees from its financial partners, viewing
Samsung Pay as an engine to drive sales of phones and other
devices.
"We're a hardware company, and at the end of the day I think
what we're trying to do is get people who hold (one of) our
phones and use it ... to just love it more," Elle Kim, Global
Vice President of Samsung Pay, told Reuters in Sydney.
It is early days yet; the companies' payment services have
been direct competitors in the United States only since last
September, China for four months, and Australia and Singapore
for just a week or two. Apple Pay is also available in Britain
and Canada, and Samsung Pay in South Korea and Spain.
Apple Pay usage totalled just $10.9 billion last year,
mostly in the United States, tiny compared with China, where an
estimated $1 trillion worth of mobile transactions were
completed last year, dominated by Internet giants Alibaba (NYSE:BABA)
BABA.N and Tencent 0700.HK .
Alibaba and Tencent have ambitions to develop their business
outside China, too, but have yet to make significant inroads.
Samsung said on Tuesday its payments service had processed
more than $1 billion in South Korea since its August launch -
still only a fraction of the country's $500 billion-plus credit
card transactions last year.
There is no reason why banks can't work with both rivals,
since these are not exclusive technologies, but Samsung's
approach could help it scale up quickly with banking partners.
"Apple wants more control, and the negotiations are more
complex," said Christophe Uzureau, Vice President of Digital
Payment Strategies at Gartner. "Samsung is more flexible, so
from a bank's perspective there is an ability to have more
flexible terms and conditions."
The two have partnerships with a long list of banks and
credit card companies in the United States and have many of the
same partners in Singapore.
Samsung Pay launched in Australia last Wednesday with
partners American Express (NYSE:AXP) AXP.N and Citibank C.N . Apple Pay
has also teamed up with Amex there and with Australia and New
Zealand Bank (ANZ) ANZ.AX , so far the only major local bank to
offer either service to its customers.
Australia's large banks all have their own mobile payment
services, though National Australia Bank NAB.AX said it
welcomed strategic partnerships in this space, and Westpac
WBC.AX said it had had discussions with a range of wallet
providers and was assessing its options.
EXTRA WEAPON
Samsung Pay also has an extra technological weapon in its
armoury.
Apple Pay only works with sales terminals equipped with Near
Field Communications (NFC) technology, but phones compatible
with Samsung Pay use both NFC and the older technology Magnetic
Secure Transmission (MST), which mimics the magnetic strip on
traditional payment cards.
That gives Samsung an edge in countries like the United
States, where NFC terminals are far from ubiquitous, said Thomas
Ko, Vice President of Samsung's Service R&D Team, Mobile
communications business.
"Mobile payments need at the end of the day to make it
available as much as where plastic is acceptable. If the mobile
payments cannot match it, it's very difficult for someone to
replace their wallet with a mobile," Ko said.
Both Apple and Samsung, which sell 40 percent of global
smartphones, are investing in mobile payment in part to defend
their premium product pricing as the industry's growth slows and
Chinese rivals bring down average selling prices.
Apple Pay is currently available on its late-model iPhones
and the Apple Watch. Samsung Pay is available on its newer
Galaxy mobile phones and some tablets.
Samsung plans to offer the service on its virtual reality
headset, and hopes that will enhance sales of the novel device.
"Both companies will be looking to their payment solutions
to drive loyalty," said Foad Fadaghi, managing director of
technology researcher Telsyte.
Apple has been able to drive loyalty through its unique
ecosystem and proprietary operating software, while Samsung,
like many makers, runs its phones on Google (NASDAQ:GOOGL)'s GOOG.O Android
software, making it more difficult to differentiate its
offering.
"It's more important for Samsung to have services like
Samsung Pay so that it can edge out its competitors which are
numerous and many in the Android space, particularly the Chinese
vendors," Fodaghi said.
Kim Ki-su, an IT industry worker in Seoul who uses Samsung
Pay, has witnessed the marketing power of the service.
"I know several people who were trying to decide between
Galaxy S7 and LG's G5, and they ultimately ended up with the S7
because of Samsung Pay," he said.
(Additinal reporting by Nataly Pak in SEOUL and Jeremy Wagstaff
in SINGAPORE; Editing by Will Waterman)