The rumor mill has proven right once again: Google has acquired Softcard, with the goal of challenging and perhaps even beating Apple Pay in the next phase of the wireless wars. Financial terms of the deal were not disclosed, but news reports peg the acquisition somewhere under $100 million.
AT&T Mobility, T-Mobile USA and Verizon Wireless founded Softcard in 2010 before there was much, if any, widespread talk of NFC-based (near field communication) mobile payments and commerce in the U.S. Softcard lets customers make payments at hundreds of thousands of merchant locations around the country.
“Google has acquired Softcard technology and capabilities to power the next generation of mobile payments,” Softbank said in a statement. “For now, Softcard customers can continue to tap and pay with the app. We will share more information with customers and partners in the coming weeks.”
A $142 Billion Opportunity
Google immediately pointed to Google Wallet. Google rolled out its mobile payment system on Sprint in 2011. The app lets customers turn their smartphones into wallets and make purchases with a tap of their phones. Google Wallet is a free Android app that stores virtual versions of a customers' credit cards, offers and loyalty cards on their smartphones.
Since then, Ariel Bardin, vice president of Payments at Google, said mobile payments have grown rapidly. Indeed, there was no Apple Pay at that time. The U.S. mobile payments market is set to boom by 2019, according to market research firm Forrester Research Inc. Forrester is predicting it will hit $142 billion by then.
“You can use the Google Wallet app on Android devices, on any carrier network, to tap and pay anywhere NFC is accepted. Over the years, we've received great feedback from people who use this feature and we’ve continued investing to make it easy and secure for more people to pay with their phones,” Bardin said. “A big part of this is working with other innovators in the industry to help provide a seamless experience across a wide range of phones and stores.”
Gaining Carrier Distribution
We turned to Greg Sterling, vice president of Strategy and Insights for the Local Search Association, who told us Google bought the assets and IP (intellectual property) rights of Softcard to gain access to the carrier distribution.
“It's pretty simple,” Sterling said. “There's really no technology the company bought otherwise. The mobile carriers' investments and interest in [Softcard] is what caused all but Sprint to block Google Wallet when it was launched." Ironically, Google now owns the guts of the company responsible for its earlier defeat, he said.
“It's not clear whether Google is paying or going to share revenues with the carriers -- Verizon, T-Mobile and AT&T. However, their dreams of being involved in mobile payments are largely over,” Sterling said. “Softcard itself is likely to shut down later in the year.”