While there had been rumors that Google was in talks with Softcard to acquire the mobile network’s joint venture, the two organizations made an official announcement about their newly formed partnership on February 23rd. Under the deal Google will acquire Softcard’s patents and technology while the three major carriers that formed Softcard will now include the Google Wallet app pre-installed on their Android smartphones.
Although Google had the first mover advantage entering the mobile wallet market in 2011, the head start gap quickly closed following the launch of Apple Pay three years later. Also during that time period Softcard, which was originally named Isis, had issues of their own including delayed pilot tests and many wondering if the mobile wallet would ever commercially debut. Google Wallet partnered with mobile carrier Sprint, but the other major carriers, Verizon Wireless, AT&T Mobility and T-Mobile USA, formed a joint venture to offer a mobile wallet of their own, and the competing mobile payment factions were not cooperating with one another. Verizon even went as far as to block Google Wallet on phones they offered that had the necessary Near Field Communication (NFC) hardware to facilitate mobile contactless payments.
Once rivals, Google Wallet and Softcard now share a common line of reasoning that reflects a famous proverb: “An enemy of my enemy is my friend.” That common enemy is Apple Pay.
To combat this enemy, or to at least keep pace with them, Google Wallet and Softcard decided to team up with a quasi-partnership-acquisition deal. Financial terms of the agreement were not disclosed, but Google is acquiring Softcard’s patents and technology related to their mobile wallet and payment infrastructure. Additionally, Google Wallet, which consumers needed to download and install on most mobile devices, will now come pre-installed on all Android smartphones running version 4.4 (Kit-Kat) of the operating system or higher that are sold by the Softcard carriers. Consumers can continue using the Softcard mobile wallet app for the time being with more information from Softcard expected in the coming weeks.
Following Apple Pays torrid start entering the world of mobile payments at the point-of-sale and Samsung’s recent acquisition of mobile wallet LoopPay, Google’s deal with Softcard was a necessary strategic step. Passbook is pre-installed on all iOS devices making Apple Pay the default mobile payment method on iPhones, iPads and iWatches that support NFC. Google, on the other hand, despite owning the Android operating system, did not enjoy the same luxury with Google Wallet. A major benefit of this partnership between Google Wallet and Softcard is cooperation from the major wireless carriers, which will lead to Google Wallet being the incumbent mobile wallet on most new Android phones.
The other primary benefit to Google from this deal is the assets they are acquiring, particularly the patents. While we are starting to see some consolidation in the market the mobile wallet wars are still in the early stages, and it is very possible that legal battles between the remaining major mobile wallet players could ensue. Should Apple, PayPal or others decide bring Google Wallet and their mobile payment technology or processes into litigation, the newly acquired patents may provide Google Wallet with greater protection.
While Google Wallet has taken a backseat in the mobile wallet media discussions since the launch of Apple Pay they are continuing to make moves in attempt to become the leading mobile wallet. Even before the deal with Softcard Google announced a new version of Google Wallet would be unveiled at their developer conference this May. This deal with Softcard both signals that Google will continue to fight to bring mobile payments and Google Wallet to the mainstream and that the mobile wallet market is maturing with competitors partnering and consolidating.
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