Samsung just unveiled a new payments platform that could be bigger than Apple Pay
Both phones will ship with the technology built-in, but the platform isn't actually launching until this summer.
Samsung Pay has a big advantage over Apple Pay, however. Apple Pay requires specialized near-field communication (NFC) pads to work, while Samsung's system will work with any terminal with a standard magnetic stripe credit card reader and NFC.
This means it will probably be a lot easier for retailers to support the platform quickly.
The reason Samsung's new phones are able to do this is because they have LoopPay's technology built in (Samsung acquired LoopPay at the end of February.) LoopPay uses a tiny metal coil to generate a magnetic current to the credit card reader, unlike NFC, which requires to you tap a device against a specific compatible sensor.
This graphic from LoopPay shows how many retailers in the US are capable of accepting its transactions versus Apple Pay.
LoopPay
Samsung hasn't mentioned specific partners just yet, but Mastercard will support Samsung Pay when it launches.
Like Apple Pay, Samsung Pay will use tokens - which means transactions will use a one-time use token rather than your credit card number when you make payments.
This type of technology is usually bit tricky to implement into magnetic stripe readers, but MasterCard says it's found a way to make it work for Samsung Pay.
EMV is the technology that puts a tiny chip inside your credit card to protect your data. The United States doesn't use this system yet, and it's unclear when it will. Fox Business reports that many companies are having trouble updating their payment terminals.
Magnetic stripe credit card readers, on the other hand, only exchange information one way - when the card is swiped, the terminal reads the card and approves the transaction. This means that unlike EMV and token-based NFC transactions, each transaction isn't unique.
But, MasterCard says its transactions going through Samsung Pay will create unique tokens whether you're using an NFC terminal or a magnetic card reader. With EMV and NFC, there's a two-way exchange of data between the terminal and the phone or credit card. This is what keeps each transaction unique to prevent information from being stolen.
"We had to do some stuff on the phone to create a dynamic approach to every transaction," James Anderson, senior vice president of shared platforms and services at Mastercard, told Business Insider.
When Samsung Pay launches, the experience will be very similar to that of NFC, but instead of tapping your phone against the terminal, you just need to hover it over the credit card reader.
While Samsung Pay sounds like it has promise, it may cause confusion for some Android users. Over the past several years, Google has been pushing it's own mobile payments service called Google Wallet, which hasn't really gained much traction since its launch.
But Google just announced that it has acquired Softcard, a mobile payments company backed by AT&T, Verizon, and T-Mobile. Until now, Google had a hard time getting Google Wallet loaded on Android phones by default just like all of its other services (Gmail, Google Maps, etc.) since carriers wanted to promote Softcard.
Now that Google doesn't have that problem, however, there's a chance Samsung phones will come with both Samsung Pay and Google Wallet, which may create some fragmentation.