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Samsung is buying mobile-payment startup LoopPay in an apparent bid to challenge Apple and its payment system on iPhones. The deal strengthens speculation that Samsung Electronics Co. plans to include mobile-payment technology in its next major phone, which is expected to be announced March 1 at the Mobile World Congress in Barcelona. Launched a year ago, LoopPay works by reproducing the signals from a credit card's magnetic swipe as users tap a LoopPay device next to a retailer's card reader. That means LoopPay should work with most retailers' existing payment terminals. Most other mobile-payment systems, including Apple Inc.'s Apple Pay, require newer terminals with wireless chips called near-field communication, or NFC. That limits the number of retailers that can accept such payments.
But LoopPay has had trouble with some older readers; restaurants and bars often couldn't process LoopPay transactions due to a variety of hardware and software issues. It also doesn't work with transit fares, parking meters and other machines that require the customer to fully insert a card, like a bank ATM. Plus, it's not clear what will happen when merchants hit an October deadline for accepting cards with stronger security known as EMV, as LoopPay offers only the basic magnetic signals. NFC and Apple Pay equipment is newer and enabled for EMV. LoopPay estimates that its system works with 90 percent of merchants. "If you can't solve the problem of merchant acceptance..., of being able to use the vast majority of your cards, then it can't really be your wallet," said David Eun, head of Samsung's Global Innovation Center.