LG made its long anticipated launch into the U.S. market for mobile wallets with the launch of LG Pay, but this event raises questions about what impact it will make in the U.S., which continues to trail key overseas countries in terms of market penetration.
LG Pay, which originally launched in Korea in 2017, allows users to load their payment accounts onto a digital app on the LG G8 ThinQ smartphone and other select LG devices and make payments anywhere Visa and Mastercard are accepted.
The LG Pay wallet, like other contactless payment systems, will work with widely used NFC readers as well as a wireless magnetic communications at magnetic stripe terminals, which are still widely used in the U.S., as the country is only a few years into the adoption of EMV and contactless debit and credit cards are still being rolled out by major banks.
Major banks, including Chase and PNC are being supported at launch as well as a number of regional banks and credit unions, and additional financial institutions are expected to be announced later in 2019.
However, analysts see LG facing an uphill battle to grow share in the U.S., mobile wallet space, which is dominated by Apple Pay, Samsung Pay and Google Pay, which cover a wide swath of devices including the iPhone, Samsung Galaxy devices and a range of devices that operate on the Android OS. Currently the U.S. represents about 3% of the global mobile wallet business, compared with China, which represents about 36%.
Thad Peterson, senior analyst at Aite Group, said he is not sure whether the LG Pay expansion into the U.S. will do much to help grow the mobile wallet business.
“LG has a small share of the market, the wallet can’t be used for native app payments for either iOS or Android and the digital wallet market in the U.S. is still growing very slowly,” Peterson told Mobile Payments Today via email. “Adding another brand to the mix potentially dilutes the category and could create confusion with new users.”
Peterson said that LG could benefit somewhat due to the mag stripe emulation capability, which could help enhance utilization, but he cautioned that Samsung has that same mag-stripe capability.
He said for LG phone users the expansion of LG Pay offers them a digital wallet capability they did not previously have, but overall he doesn’t see any significant impact on the market for 2-3 years.
LG has taken steps to differentiate itself from the competition by launching partnership agreements that will help generate customer loyalty to the service. The company’s initial partnership with Swych, a unit of Finablr, gives users the ability to buy digital gift cards directly through the device and then send the gifts directly to friends, family or other recipients.
Rivka Gewirtz Little, research director, global payment strategies at IDC, told Mobile Payments Today that successful mobile wallets need to develop unique features and capabilities and also need to promote those feature sets to potential customers.
“Mobile wallets that are just about a payment are generally not enough to create customer excitement,” she said in an interview.
LG officials were not immediately available for comment.
Images courtesy of LG.