Samsung just bought the one payments company that could be bigger than Apple Pay

Samsung made one of its smartest acquisitions ever Wednesday by buying the mobile payments startup LoopPay.

LoopPay is still in its early days, but its technology gives it the potential to be bigger than Apple Pay once it's implemented in a major device made by Samsung.

It's pretty simple:

Apple Pay only works with special payment pads that use near field communication (NFC) technology. NFC has been around for years, but relatively few retailers have it on their sales terminals. So far, Apple says Apple Pay is supported at over 200,000 retailers in the US, but major retailers like Target, Best Buy, and Walmart don't accept Apple Pay and haven't said if they ever will.

LoopPay, on the other hand, works with standard magnetic credit card readers. The company claims that LoopPay will work at 90% of retailers that accept credit cards. Plus, it works overseas, whereas Apple Pay is only available in the US for now. Once Samsung starts incorporating LoopPay into its phones as it's rumored to do with the upcoming Galaxy S6, its payments system will immediately be much larger and more widely accepted than Apple Pay.

Apple Pay may be a great system that works flawlessly, but it's not accepted at enough places to truly replace your wallet. LoopPay brings us much closer to that reality.

On the other hand, LoopPay faces its own challenges.

In an interview with Business Insider Wednesday, LoopPay and Samsung executives declined to say if the payments system will continue to work with non-Samsung hardware. If LoopPay is only available through Samsung, it could be a problem to keep the system growing as Samsung's smartphone sales continue to shrink. It also gives rivals like Xiaomi, Google, HTC, and Lenovo an opportunity to come up with their own answers to LoopPay and Apple Pay.

Finally, it's unclear if LoopPay will let third-party shopping apps allow in-app purchases using the system like Apple Pay does now.