War Of The Wallets

Editor’s note: Sep Seyedi is the CEO of Plastic.

Being a contender in the mobile payments space is becoming a coveted position by large and small businesses. A largely fragmented sector with several unexpected turns over the years, the digital wallet battlefield has recently been showing signs of maturation, which tells us that the market is starting to consolidate and that prominent players may soon emerge.

Since the inception of mobile payments, there has been a lack of a cohesive solution by key players in the space. For example, businesses and payment vendors are at odds with the banks over sharing transaction revenues. And now cellular providers are creating a proprietary solution to avoid dealing with Apple and Google. As we leap into 2015, mobile payments are expected to become mainstream within the next 12 months, and the market has already begun to straighten out.

Google, which took a big step into the market with Wallet and opened up the application to third parties through Host Card Emulation, took it one step further with the introduction of a virtual card to be used exclusively within Google Wallet as a way of circumventing the fact that it didn’t have partnerships with major credit card companies. Looking at the mobile payment space in 2015, it’s obvious that Google has fallen behind in the war of wallets, but more on that later.

In late 2014, and almost overnight, the mobile payment space became synonymous with one brand: Apple. Apple Pay has been the darling of the media for the last several months with everyone with a web voice covering it at least once. With the launch of iOS 8 and the new iPhones, the ability to make credit card payments via NFC on your smartphone instantly became a convenient reality for millions of people. One month after Apple Pay launched in the U.S., it already accounted for 1 percent of all digital purchases.

Google is now trying to reinvigorate its mobile payment platform. The fact that Apple stirred up the mobile payment space is great for all contenders and consumers. A month after Apple Pay launched, Google Wallet saw transactions increase by 50 percent in a single month, and the number of active users doubled. However, Google recognizes that without bank and credit card partnerships it will not be able to maintain this growth or compete with Apple. The rumor mill indicates that Google may have determined a path of action to turn the tide in the war of wallets.

Softcard, a brain child of the humble segregated beginnings of the mobile payment market, formed out of a surprising collaboration of AT&T, Verizon and T­-Mobile. This telecom-powered wallet platform was meant to be a means of cutting out the likes of Google and Apple from monopolizing the mobile payment market. Cellular providers believed they could gain market share and generate revenue by pre­installs on Android devices that they sold. As with many of the early platforms, Softcard didn’t resonate with users. As time went on, this mobile wallet faded into the background, soon to be forgotten by users.

That was until rumors surfaced that Google purchased the platform for what analysts are calling a “basement bargain price of $100 million.”

Google’s interest in a company on its deathbed that has never showed positive business metrics or success may seem questionable, but Google is looking forward as Softcard provides Google with half of the mobile payment equation. A partnership quest that had failed several years ago is now putting the same telecom companies at the negotiating table to hammer out a deal that will benefit all parties in more ways than one.

It also happens to strengthen Google’s Wallet game since it doesn’t seem to be corroborating with the banks any time soon. Unlike competitors, Google doesn’t need a partnership with the banks, they solved for “X” through the introduction of Host Card Emulation in Android 4.4, which allowed for virtual cards within Google Wallet.

These virtual cards were able to bridge the gap between merchants, payees and financial institutions. Google will not only be able to circumvent lengthy partnership agreements with financial institutions but it is also able to cut them out of their system altogether, making competition that much more fierce.

It has been noted that Softcard holds approximately 120 patents that could be of value to Google, as well.

If the acquisition is confirmed, this could be the move that puts Google ahead of Apple Pay.