It shouldn’t be any shock to learn that starting your own mobile payment operation can be a huge investment. You’ve got to develop software, set up infrastructure, and secure deals with countless third parties, from retailers to banks. But despite those issues to deal with, a growing number of companies is tackling the challenge, and despite fears we might have had that the market would quickly saturate, we’re still seeing solid growth on multiple fronts. Samsung has been showing some impressive movement lately, taking big strides as it seeks to catch up with Google and Apple. But while Samsung Pay may prove to be a formidable player, is that growth coming at a cost? That’s what hearing today, as we learn that last year Samsung Pay ultimately lost $16.8 million.
That doesn’t sound great for Samsung, but we need to step back a little. For one thing, Samsung Pay isn’t exactly set up to be a money-maker itself: right now, it’s not charging anyone fees for its role in payment processing, eliminating a primary source of potential income. Factor in operation costs, and it’s easy to see how something like Samsung Pay can start looking like a money sink, rather than a source for new income.
What’s the point, then? Well, in the long term, the information Samsung’s able to gather about consumer spending habits is bound to be valuable data. And maybe most importantly, Samsung Pay can be positioned as a feature used to help sell Samsung smartphones – especially with their magstripe-emulation hardware absent from the mobile payment offerings of competitors.
If Samsung Pay helps drive $50 million in additional smartphone sales over the course of a year (a figure we’re just pulling out of out speculative hat), what’s a $17M operating loss ultimately matter? We figure that’s along the lines of what Samsung’s thinking, and we wouldn’t expect to see any drastic changes to Samsung Pay as a result of its underwhelming financial performance.