Samsung Pay's ubiquity secret: a magnetic chip

The security of NFC transactions has been discussed before, but put shortly, let's say that an NFC (Near-Field Communication) transaction happens between two devices (a terminal and a phone in our case) that both have an NFC chip installed. NFC uses less energy than Bluetooth and authorization happens easier and in an instance.

There are two key pieces to NFC transactions security: tokenization (rather than transmitting actual card numbers, what's transferred are encrypted tokens, so it's impossible to snoop on sensitive data) and the secure element. The Secure Element (SE) is a separate chip built inside the phone. It is different than other chips not in just function - it is designed to be physically resistant to malicious hackers. Each time a user starts a transaction, the SE assists in generating a random, one-time use code rather actual card numbers.

The understand the security aspect of MST transactions, one has to understand how MST works. The magic happens in the following way: the magnetic coil inside your Galaxy phone runs alternating currents through an inductive loop and generates a dynamic magnetic field. Terminals aka card stripe readers will read this magnetic field if your device is within 3-inch distance. This exact magnetic field contains your payment information. The fact that it works over just 3-inch distance means that a potential hacker has to operate within this incredible proximity to attempt to steal money, which alone is reassuring that payments are secure.