Rumor has it that search giant Google Inc. (GOOGL) is in talks to acquire Softcard, a mobile-payments service, in a bid to boost its Wallet and compete against Apple (AAPL) Pay.
What is Softcard?
Softcard, formerly known as Isis, was started jointly by AT&T (T), Verizon (VZ) Wireless, and T-Mobile USA (TMUS) in 2010. Softcard was launched to battle Google Wallet but saw little success. The company claims that it can be used at over 200,000 merchants, including McDonalds and Subway. Softcard has an app which works both on Windows Phone and Android. It allows consumers to make payments through connected debit and credit cards from American Express, Chase, Wells Fargo and others banks.
The company has recently laid off a number of workers and is reportedly looking for a buyer. Per reports, Google recently entered exclusive discussions with Softcard by offering to buy the service for at least $50 million. The reports state that apart from boosting its Wallet Service, Softcard’s portfolio of over 120 patents and patent applications related to mobile payments could also be a reason for Google’s interest in the company. PayPal and Microsoft have also expressed interest in Softcard.
However, none of the parties were available for comment.
Why Should Google Acquire Softcard?
The increasing adoption of smartphones, tablets and other mobile Internet devices has become the biggest growth driver in the industry. Consumers now prefer the convenience of ordering and paying online over the hassles of shopping at brick-and-mortar stores. As more and more customers prefer online shopping nowadays, the use of this online payment service has increased.
Google Wallet was a pioneer in mobile payments. It enables in-app purchase and mobile payments in addition to POS purchases and money transfer. Other than credit and debit card information, users can store loyalty cards, discount coupons and offers that they can apply during purchase.
The service can be used on both NFC-enabled and older terminals. Google pushed adoption by making it compulsory for Android development partners. So the service should grow as Google Play sales gather momentum.
In order to benefit from this change, Google has been adding new and improved features to boost its digital wallet application.
But even with such efforts the digital wallet service gained little traction in stores as it was blocked by telecom carriers.
The search engine giant strives to enhance its competitive strength against rival mobile payment service providers such as eBay’s PayPal, Intuit Inc.'s GoPayment and Starbucks-backed Square Inc. to name a few. eBay has been the forerunner in mobile payments and PayPal has consistently supplemented online payments with offline payment solutions.
But with the launch of Apple Pay in November and its early popularity with merchants and consumers, Google sees the need to revive its Wallet service.
Therefore, the acquisition, if it takes place, will help to extend its Wallet service in the mobile payment space and put it in a better position to challenge Apple Pay.
Google currently has a Zacks Rank #3 (Hold).
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