"This technology will most likely be replaced by more secure options like chip-and-PIN one day, but it will take many years for the full switch to happen. Samsung Pay also communicates with NFC readers, so the strips aren't the only way it can function. Once you enter and verify your card data in the app, Samsung Pay generates a new virtual card to keep your financial data secure. As you make a purchase, your phone emits a magnetic secure transmission, and the card reader will think you just swiped that virtual card. But there's no need to actually swipe. Just hold your phone close to the terminal. If you check out your receipt, you'll see that the last four card digits listedaren't the same as your actual card.
This is a fantastic innovation that solves the single largest problem facing mobile-payment systems: you just can't expect most retailers to have NFC readers. Big chains like McDonalds and Walgreens have been pretty good about upgrading most of their locations, and the technology will surely spread as time goes on. But right now there are countless smaller establishments that only accept cards or cash. You don't need to worry about those discouraging hurdles when using Samsung Pay. It even works with mobile, external card readers like Square."