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Should Google buy Softcard, and Should AT&T, T-Mobile and Verizon Sell?

by Nitesh Patel | Jan 22, 2015

If rumors relating to Google acquiring Softcard are true could combining the efforts of two struggling mobile NFC payment and marketing ecosystems improve Google’s chances of success?

The above rumor raises three critical questions - How does this effect Google/Google Wallet’s viability in the mobile payment space? What happens to the MNOs (AT&T, T-Mobile and Verizon) participation in the SoftCard joint venture? And how does this move impact retailers and banks, which are key players in the $130 B mobile payments market?

  • A boost for Google: Google has struggled to attract the necessary partners to drive momentum behind its NFC payment ecosystem as both major financial service providers (e.g. banks) and mobile operators (AT&T, T Mobile, and Verizon) opted to block Google Wallet. Participating banks could have promoted Google Wallet to customers, while mobile operators (which account for a significant market share of US mobile subscribers) could distribute Android smartphones preloaded with Google Wallet. Unfortunately (and predictably) for Google, Google Wallet never caught traction as the aforementioned MNOs involved in the Softcard venture blocked Google Wallet on Android phones sold through operator channels. Acquiring Softcard should, to some extent, solve those problems for Google; Softcard names American Express, Chase, and Wells Fargo as partners, while disposing of Softcard would remove any competitive conflict between Google and the MNOs.
  • MNOs cut their losses: Selling Softcard would be viewed as a costly mistake for participating MNOs (AT&T, T-Mobile and Verizon). Those operators have reportedly invested over $ 100 million in Softcard, without return. With US operators’ core businesses under pressure, their appetite to continue to invest in Softcard is quickly disappearing. We expect real growth in consumer adoption and use of mobile NFC payment from 2017 onwards based on two key factors:
  1.  
    1. Growth in number of merchants accepting NFC at the POS
    2. Marketing and advertising platforms (offering retailer friendly deals) link with NFC payments thus increasing consumer awareness

In the US we already believe Apple Pay will assist with the latter. More importantly, while controlling mobile payments is clearly a strategic move for MNOs, alternatives such as Google Wallet have undermined the MNO business case by not charging a rental fee to those service providers for storing and managing their secure apps on the secure element.   

  • Less fragmentation is good for retailers and service providers (e.g. banks, transport companies): The lack of mobile payment standard acts as a barrier to retailer adoption of mobile payment systems. With multiple technologies and separate ecosystems vying for a place in the retailer POS, many retailers and restaurants have held back from deploying mobile payment capability. In the US MCX has elected to create and launch its own mobile wallet, which does not require investment in NFC enabled POS, and which provides greater control and ownership of mobile payment and mobile marketing by the retailer. Banks, transport companies, and retailers would prefer a single wallet solution rather than several propositions, but while we wait on that solution to establish clear dominance in the space, those institutions will have to continue to hedge their bets.

By selling Softcard, are its MNO participants going to allow Google to own and control space on the SIM card for mobile payments and other secure applications? In my view this is highly unlikely given the strategic importance of SIM cards for authenticating customers onto their networks, not to mention the broader industry distrust of Google and its intentions.  Is Google even interested in SIM-based NFC, after adding HCE support into Android in late 2013?  HCE enables service providers to launch secure services like payments, access and transit passes OTT, i.e.  without access to a secure chip in the phone. Will the limited number of service providers (e.g. banks) supporting Softcard and those retail venues backing Softcard decide to abandon ship once Google gets involved? And should PayPal, which does not have a strong offering in NFC, attempt to plug this gap by bidding for Softcard? Watches this space as this story unfolds……

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