Apple has Apple Pay, and now it looks like Google may be fattening up its own wallet. According to people familiar with the situation, the search giant and maker of Android is interested in buying Softcard, the mobile payments company formerly known as Isis.
The price may be under $100 million, according to our sources. That is either a huge bargain or a testament to Softcard’s difficulties as an enterprise: sources tell us that AT&T, Verizon and T-Mobile — the three carriers that started Isis in 2010 — have collectively invested hundreds of millions of dollars in the joint venture.
Softcard earlier this month laid off about 60 employees and has been in a consolidation phase. The company would not comment on the M&A rumors or how much has been invested in the operation but provided a comment about the layoffs.
“Softcard is taking steps to reduce costs and strengthen its business. This includes simplifying the company’s organizational structure and consolidating all operations into its Dallas and New York offices, which involves layoffs across the company,” a spokesperson said. “We believe these efficiencies will best position Softcard in the marketplace while maintaining focus on serving our market.”
Google also 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,” the company said in an emailed statement.
Softcard, created as a unified front for the big carriers to come to market with a “contactless” NFC mobile payments solution (also what Apple Pay uses), says that there are over 200,000 merchants in the U.S. (including some biggies like Subway and McDonalds) that can accept payments with its app, which is available for Android and Windows Phone devices but not Apple’s iPhone handsets.
Softcard app users can activate payment cards from American Express, Chase, Wells Fargo and other banks in the app to then use their phones to pay for things with those merchants.
It’s not clear, however, whether the service picked up a lot of traction with consumers, or what kind of a return the service was getting. Led by CEO Michael Abbott, the company in November 2014 undertook a new marketing campaign around a new mascot called “Tappy,” created by Jim Henson’s Creature Shop, the same group that created the Muppets, in “a new campaign aimed at educating consumers on Softcard and mobile payments in a fun, social, and sharable way.”
A source tells us that at one point the company’s burn rate was around half a million dollars per day, or around $15 million per month.
Google’s interest in the company had been rumored elsewhere (see here and here, where PayPal is also named). Our sources note that both PayPal and Microsoft have also approached the company.
Another possibility, if an external sale is not achieved, would be JV partners AT&T or Verizon taking it under one of their wings, although they have also been looking at developing their own wallet services for mobile devices.
Our sources say that one of the reasons for Google’s interest is Softcard’s patents, or more specifically what appear to be applications for patents. The company has just over 120 in all.
There are also existing relationships with the JV (joint venture) carriers, and there could potentially be deals in negotiation to hold on to these, and their retail channels, as part of the transaction.
Amidst the rumors, at Softcard itself, we’ve heard that morale has been pretty low at the company.
“People at Softcard have a limited view on what’s going on,” one source said. “The whole place has been in a complete depression for at least six to eight months, to the point where people weren’t coming to work, and were being told in December to take it easy through the end of the year. In general, it’s not a culture with a lot of transparency, so a lot of people are thinking the worst.”
Another ex-employee I talked to who would go on the record notes that the timing is pretty bad. “It’s unfortunate that they’ve chosen now as a time to scale back,” says Ed Busby, formerly the chief commerce officer of the company. “Externally, for the first time since I’ve been in this industry, the signs are pointing positively for mobile payments.” He notes the rise of Apple Pay as one of those boosts.
On the subject of a potential sale, he’s unsurprised, too. “I just think everyone realised that this would be a longer haul than people thought going into it, and as a result they aren’t willing to make the types of investment that would be required to sustain this.”
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