This particular payment system is the first commercial implementation of a new authorization protocol developed by the FIDO Alliance, a security group of technological companies that include BlackBerry, Google, Lenovo, MasterCard, Microsoft, and PayPal. The protocol is designed so that a record of your fingerprint is never transmitted to an outside party. Instead, data from the fingerprint reader is used to generate a cryptographic keyc which is combined with a second key from the device’s cryptographic chip to make a third key. This way, the final key can’t be used to somehow "decode" the fingerprint that was used to generate it.
The Galaxy S5 is the first and only consumer device so far that supports PayPal’s FIDO-based authorization system. PayPal isn't saying when other devices will follow suit, but industry representatives assert that fingerprint readers will become ubiquitous in near-future smart-devices.
source: MIT Technology Review