Google (GOOG, Financial) is planning to buy Softcard, a mobile payment company, to serve its payment services. Currently Softcard is a joint venture between AT&T Inc. (T, Financial), Verizon communications Inc. (VZ, Financial) and T-Mobile US, Inc (TMUS, Financial). Also Softcard is a proud partner with Discover Network (DISCA, Financial) and Barclay (BCS, Financial) Card US.
The purpose behind this acquisition, speculated to be less than $100 million, is Softcard’s portfolio of more than 120 patents and patent applications connected to mobile payments. This acquisition is expected to boost the Google Wallet service, and to give rigorous competition to Apple (AAPL, Financial)Â Pay.
The sinking Softcard
Softcard was founded in 2010. It has been reported by Techcrunch that the price tag offered by Google is quite less than what AT&T Inc., Verizon communications Inc. and T-Mobile US Inc. have spent on it. The firm retrenched a lot of employees in order to cut the costs, as it is spending more than $15 million per month.
“Softcard is taking steps to cut down fees and strengthen its enterprise. This incorporates simplifying the company’s organizational structure and consolidating all operations into its Dallas and New York offices, which requires layoffs across the organization. We believe these efficiencies will best position Softcard in a market place while maintaining focus on serving our market”, said a Softcard spokesperson. Although one of the former employees has a contrary opinion, “the layoffs were badly timed for the Softcard as Apple Pay could create interest in mobile payments”.
“People at Softcard have a limited view on what’s going on,” an unconfirmed report said. “The whole place has been in a complete depression for at least six to eight months, to the point where people were not 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.”
The race to adopt the sick child
According to the reports not only Google, but PayPal Inc., the payments services that eBay Inc. (EBAY, Financial) plans to spin off this year, has also shown interest in buying Softcard. But according to them, Softcard prefers Google to seal the deal with. As Softcard generally deals with the mobile payment segment that runs on Google’s android operating systems.
Mobile payments in Softcard are carried on through close-to field communication, or NFC, the same kind of technology used by Apple Spend in iPhone 5s or iPhone 6. Softcard claims that this facility could be utilized at more than 200,000 stores, including those of the fast food giants, McDonald's (MCD, Financial) and Subway. The Softcard app works on windows phone and android. It produces payments from the credit or debit cards linked with the app, of American Express (AXP, Financial), J.P. Morgan Chase (JPM), Wells Fargo (WFC) and others.
Trivia
Talking back a few years ago soft card was in an argument with Google. Google attempted to launch a mobile payment system but its access was obstructed by Verizon. All Verizon phones had a chip placed inside them that locked any access to the secure chip.
It was a safety measure taken by Verizon in order to assure safe transactions. It has been speculated that Verizon was determined to slow down Google wallet.
Conclusion
Google generally does not confirm the value of its acquisitions in public, unless and until the deal gets a seal of finality. According to an email statement of the company, “they do not have any sort of comment or any other verbal or non-verbal response to such sort of rumors which are spread out in the market.” In spite of this denial, we all know that Softcard is linked with partners which could only benefit Google. Thus while it seemed that the year 2015 would be a rather bleak year for Google the think tanks at Google have already started working on ways to make 2015 a brighter year for their investors.
