Google (NASDAQ: GOOG) is interested in buying mobile payments company Softcard, according to multiple reports, in a deal that would bring Google into closer alignment with wireless carriers and that would consolidate the payments market just as Apple (NASDAQ: AAPL) Pay is getting off the ground.
According to reports in TechCrunch, the Wall Street Journal and the New York Times, all of which cited unnamed sources familiar with the matter, Google is considering acquiring Softcard. PayPal is also bidding for Softcard, according to the reports. Softcard is a joint venture backed by Verizon Wireless (NYSE: VZ), AT&T Mobility (NYSE:T) and T-Mobile US (NYSE:TMUS).
Representatives for AT&T, Verizon, T-Mobile, PayPal and Softcard declined to comment. "We don't have a comment, background, deep background, off the record steer, nod, wink or any other verbal or non-verbal response to these sorts of rumors," a Google spokesperson said in a statement sent to multiple news outlets.
It's unclear how much Google might be willing to pay for Softcard, which rebranded itself from "Isis" last September to disassociate itself from the extremist Islamist militant group, the Islamic State, also known as ISIS. The WSJ reported Google's bid is at least $50 million and TechCrunch and the NYT reported that it was for less than $100 million. According to TechCrunch, Verizon, AT&T and T-Mobile have poured hundreds of millions of dollars into Softcard since it was founded in November 2010.
Softcard, like Apple Pay and Google Wallet, uses Near Field Communications to let customers make contactless payments from an app on their phones. Softcard says that there are more than 200,000 merchants in the U.S. (including major chains like McDonald's and Subway) that support the Softcard app, which is available for Android and Windows Phone smartphones but not the iPhone. Softcard works with payment cards from American Express, Chase, Wells Fargo and other banks.
However, there have been signs that Softcard has not gained traction with consumers. Earlier this month Softcard cut 60 employees, which the company said was part of efforts to "reduce costs and strengthen its business." TechCrunch reported the company was burning through a half a million dollars per day, or around $15 million per month. The WSJ reported that remaining employees were told to stop working while the business sought a buyer.
A deal between Google and Softcard would bring together companies that have a long history of working together, as Verizon, AT&T and T-Mobile are all longstanding supporters of Google's Android mobile platform and already get a fraction of the revenue Google makes from ads served on Android and applications and content bought through its Play store. Google also currently offers its Google Wallet service, which seeks to provide some mobile payment and commerce services. However, Google has revamped the Google Wallet service several times since introducing it in 2011.
Originally, Google Wallet included an idea for an advertising system that would use purchases in physical stores to improve the targeting of digital ads, according to the Journal. Google wanted to share some of this ad revenue with carriers, but the companies couldn't agree on terms, so a deal for Softcard might revive that.
In any event, the perceived early success and acceptance of Apple Pay in the market has spurred Google and PayPal to get more aggressive in the mobile payments market, the NYT and WSJ reported. Apple has deals with the six biggest credit-card issuers for its new Apple Pay service, accounting for around 83 percent of credit-card transactions in the U.S. Apple Pay works at around 220,000 stores and lets users pay for goods via NFC on the new iPhone 6 and 6 Plus.
Meanwhile, the Merchant Customer Exchange (MCX) is setting up a mobile payments system called CurrentC to rival Apple Pay, Softcard and other mobile payment offerings. Last fall MCX took a great deal of criticism because merchants that have signed up for its system, including Walmart, Target, CVS, Rite Aid, Best Buy and others, have agreed to use CurrentC exclusively. However, MCX CEO Dekkers Davidson told Re/code in November that the exclusive arrangement likely won't last long.
- see this TechCrunch article
- see this WSJ article (sub. req.)
- see this NYT article
- see this CNET article
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