Samsung Electronics has decided not to charge credit card companies for using Samsung Pay, in contrast to Apple Pay, which recently introduced fees. Considering the financial challenges faced by credit card companies with declining profitability, the tech giant has opted to uphold a fee-free system, offering relief to its partners, Samsung announced on Wednesday.
This decision contrasts earlier expectations that Samsung Pay might follow in the footsteps of Apple Pay and introduce fees.
“To develop the nation’s mobile payment service ecosystem, we will coexist with local credit card companies and provide customers with the best Samsung Pay service,” Samsung said.
Since its introduction in South Korea in 2015, Samsung Pay has consistently upheld its operational contracts with various card firms, and these agreements have maintained provisions that exclude any separate commission payments to Samsung from the card companies about Samsung Pay. Moreover, these terms have been automatically renewed annually, ensuring a seamless continuation of the arrangements.
Until now, credit card companies had not incurred individual charges through their group contracts with Samsung Pay. Instead, they only paid royalties for utilizing Samsung Pay’s Magnetic Secure Transmission (MST) payment method in applications and other platforms. With no amendments to their terms, the contracts have naturally extended each year.
Earlier this year, Samsung Pay notified local credit card companies that the existing conditions would not be automatically renewed. Instead, they would be subject to negotiations. This announcement sparked speculation that Samsung Pay might introduce commissions similar to Apple Pay’s model.
Apple Pay, which debuted in Korea in March, currently collaborates exclusively with Hyundai Card and charges an estimated commission of 0.15 percent per transaction. This commission structure had initially deterred other credit card companies from immediately joining the Apple Pay service, as they were already facing challenges due to a sluggish economy impacting their sales.
With approximately 20 million users, Samsung Pay is Korea’s largest offline mobile payment service, having refrained from charging any commission to local credit card companies since its inception in 2015.
Given last year’s substantial card approval amount of 1,100 trillion won (approximately US$870.3 billion) and the significant user base of Samsung Pay, representing around 39% of the country’s total population, any introduction of fees similar to Apple Pay’s 0.15% commission could result in an annual burden of 640 billion won for credit card companies.
This potential financial burden has raised concerns in some quarters, fearing that the imposition of fees by Samsung Pay might lead credit card companies to consider reducing customer benefits or imposing limits to maintain their profitability.