Samsung announces partnership with Naver Finance in Korea
Samsung Electronics has announced a new partnership with internet giant Naver, aiming to strengthen its digital payment service, Samsung Pay. The strategic collaboration comes after rival Apple announced it will launch Apple Pay in Korea in March, 2023. Samsung has been dominant in Korea for years, but the concern is that users will switch from Galaxy smartphones once Apple Pay is launched. That means the race is on if Samsung wants to retain its pre-eminence.
In late February, it was revealed that Samsung’s collaboration with Naver Financial would promote its mobile payment system, making digital payments more convenient for users. Currently, Naver Pay is Korea’s second-largest mobile payment provider, meaning the deal ensures a much stronger presence for Samsung in the face of incoming competition.
Apple Pay was launched in the US in 2014, allowing Apple device users to make payments in person and online without physical cards. It soon became the second-most popular digital payment system worldwide, totalling $6 trillion worth of transactions in 2021, behind Visa with $10 trillion. Meanwhile, Samsung Pay only reached $200 billion in the same year.
Despite its global shortcomings, Samsung Pay was the most-used financial services app in Korea, with 16 million users as of November, 2022. The service is based on magnetic secure transmission (MST) technology. Apple Pay uses a different method, short-range wireless protocol near-field communication (NFC), which there hasn’t been the infrastructure to suport in Korea. This is all set to change, as the company recently got approval from the Financial Services Commission to bring Apple Pay to Korea.
In preparation for Apple Pay’s launch, Samsung’s statement on Monday said the partnership with Naver Financial seeks business synergy between the two popular payment services. The deal is considered beneficial for both companies: Naver Pay, the top player in online payments in Korea can use Samsung’s offline 5G networks, while Samsung Pay’s offline payments will work at around 550,000 online stores on Naver.
Counterpoint Research data showed that 83% of the Korean market was taken up by Samsung smartphones, while Apple only counted for 13%. Following the iPhone 14 launch, Apple did replace Samsung as the top global player in the fourth quarter of 2022, but the margin was small: 23% for Apple, with Samsung close behind on 19%.
Samsung Pay will benefit from Naver Pay’s existing 35 million members, but the future still seems uncertain. University student community operator Vinu Labs Inc. found in a survey that of 2,000 students, 89% felt the Apple brand was “trendy,” with other responses calling it “refined” and “luxurious”. Gen Z Galaxy users have said they’ll swap smartphones to iPhone with the incentive of Apple Pay.
Samsung partnership to fend off Apple
Local industry will be keen to see how Samsung fares after the launch of Apple Pay. The market share of Samsung is expected to drop, despite its attempts to prevent Apple Pay’s expansion. According to an industry official, to begin with, Apple Pay will be “limited in terms of convenience” as it won’t support services such as transportation payments.
Ultimately, forecasts by Counterpoint suggest that Apple Pay is unlikely to significantly change the Korean smartphone market. Its launch will rouse interest, but it’s unlikely that many people will change devices because of the service. Perhaps Galaxy users stand to benefit from Apple’s expansion into Korea, as Samsung ups its game to stay ahead.
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