Over the past couple weeks, rumors have been flying that Google would be buying Softcard, the struggling mobile payments venture jointly owned by AT&T, Verizon and T-Mobile, for somewhere in the $50-$100MM range. (You might know Softcard by their former name, Isis; they made the name change last Fall as the Islamist militant group by that name became better known).
While this deal is certainly a reaction to the launch and perceived early success of ApplePay (see our Recent blog post Banks Sign Up For Apple Pay), there are clearly other factors in play.
If this deal closes, Google is expected to roll Softcard into their current mobile payment system, Wallet. Wallet has never really gained any traction, at least partly because these same telecom companies Google is now negotiating with did not adopt it. (Ironically, Softcard was originally envisioned “Google Wallet without Google.”)
So, apart from trying to keep up with Apple, what is going on here?
First, this is clearly about creating a better relationship with the mobile carriers that Google relies on. Until now, the carriers had blocked Google’s attempt to access the secure NFC chip in their devices. With the Softcard purchase, Google has essentially bought their way into the NFC game.
Apple, on the other hand, makes both the hardware and software, and did not face the same restriction (the fact that Apple still commands over 40% of the US smartphone market and a disproportionately higher share of m-commerce probably didn’t hurt Apple’s cause either).
Second, there are larger trust issues at stake. ApplePay isn’t a particularly large piece of Apple’s revenue pie and that’s not really its role. It exists to solve a specific problem – making mobile payments easier and more secure – and in doing so to sell more Apple hardware. They don’t appear to care so much about data, if it risks security.
But Google licenses Android for free and makes their money on the ad component. So collecting purchase data that can be channeled back into their digital advertising business is at the heart of any mobile payment plan. And that has made many people, including banks, mistrustful of any Google mobile payment system.
And since Google is still dependent on partnerships with those banks to make any mobile payment system work (something they have been unable to accomplish over the past several years), Softcard may turn out to be a much better thing to be selling than it is to be buying.