Samsung Pay posts net loss in first year, but that's not necessarily a problem

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The early numbers are out on Samsung Pay and, on the surface, they're not so hot.

Samsung's 2015 audit shows that the company's mobile wallet division posted a net loss of $16.8 million for the year, according to ETNews. Samsung acquired LoopPay, which eventually became Samsung Pay, for $229 million in February 2015.

But Samsung is not concerned about the loss because it acquired the platform as an intangible asset. This is because LoopPay's technology allows the use of Samsung Pay at any point-of-sale terminal that accepts cards with magnetic stripes, which gives Samsung Pay an advantage over its competitors because it can be used at the widest variety of merchants. This wide acceptance makes it easier for consumers to develop a habit of using Samsung Pay regularly.

Samsung also envisions its mobile wallet as a way to understand consumers, build relationships with merchants, and expand its commerce ecosystem.

The company does not take a piece of the interchange revenue, unlike peer services such as Apple Pay that take a small percentage of each transaction.

But Samsung Pay could help the company gather data on consumer spending habits, which would help Samsung create specific marketing and advertising campaigns in the future. Samsung eventually wants to create loyalty with merchants and offer discount partnerships, an idea that has monetization potential.

And while the mobile wallet posted a net loss in its first year, it did show growth that indicates significant value. After six months in South Korea and five months in the U.S., it brought in five million customers and processed $500 million in mobile payments, and those numbers could grow if Samsung expands its market share in those nations.

Samsung Pay's development bears watching in the next several months, particularly as the world of payments continues to change. As mobile wallets become more common, the way in which we buy products will continue to transform.

The payments landscape is always changing, but that doesn't mean it's unpredictable. In fact, there's plenty to learn about this particular market.

Evan Bakker and John Heggestuen, analysts at BI Intelligence, Business Insider's premium research service, have compiled a detailed report on the payments ecosystem that drills into the industry to explain how a broad range of transactions are processed, including prepaid and store cards, as well as revealing which types of companies are in the best and worst position to capitalize on the latest industry trends.

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Here are some key takeaways from the report:

• 2016 will be a watershed year for the payments industry. Payments companies are improving security, expanding their mobile offerings, and building commerce capabilities that will give consumers a more compelling reason to make purchases using digital devices.
• Payments is an extremely complex industry. To understand the next big digital opportunity lies, it's critical to understand how the traditional credit- and debit-processing chain works and what roles acquirers, processors, issuing banks, card networks, independent sales organizations, gateways, and software and hardware providers play.
• Alternative technologies could disrupt the processing ecosystem. Devices ranging from refrigerators to smartwatches now feature payment capabilities, which will spur changes in consumer payment behaviors. Likewise, blockchain technology, the protocol that underlies Bitcoin, could one day change how consumer card payments are verified.

In full, the report:

• Uncovers the key themes and trends affecting the payments industry in 2016 and beyond.
• Gives a detailed description of the stakeholders involved in a payment transaction, along with hardware and software providers.
• Offers diagrams and infographics explaining how card transactions are processed and which players are involved in each step.
• Provides charts on our latest forecasts, key company growth, survey results, and more.
• Analyzes the alternative technologies, including blockchain, which could further disrupt the ecosystem.

To get your copy of this invaluable guide, choose one of these options:

1. Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
2. Purchase the report and download it immediately from our research store. >> BUY THE REPORT

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the payments ecosystem.