Google is buying some technology and intellectual property from the rival Android-based mobile wallet Softcard, giving Google a chance to finally put to bed several business problems that have plagued the company since it launched its mobile wallet in 2011.
Google's biggest issue was that its Android-based mobile wallet was in direct competition with the mobile carriers who sell most of its Android smartphones in the U.S. The carriers behind the Softcard venture Verizon Wireless, AT&T and T-Mobile refused to allow Google Wallet on their handsets, citing security concerns, until Google changed the way it enabled wireless payments.
Softcard has faced several issues of its own since launching in 2013. Notably, the product had to abandon its earlier brand name, Isis, after the name became more prominently associated with a violent militant group. More recently, the venture reduced its workforce and office locations amid rumors that it was up for sale to Google or another buyer.
In Softcard's favor is its distribution model. The mobile carriers behind Softcard already approve of its underlying technology, and use their in-store sales force to help consumers sign up for the mobile wallet. American Express has said that this process has improved enrollments with the Serve digital wallet, which is embedded in the Softcard app.
The carriers will benefit even more by shedding their role in developing and maintaining a mobile wallet, said Thad Peterson, senior analyst with Boston-based Aite Group,
"Google already has the wallet infrastructure ready to go and has some scale," Peterson said. "It frees up the mobile operators from worrying about the wallet infrastructure any longer, it is not something they have to force."
Google's brand name is also much more widely known than Softcard (and less toxic than Isis). In addition, the potential now exists for the Google Wallet to shift to Softcard's model of operating through a secure element on a handset, Peterson said. This is the same technological approach Apple Pay uses.
Google Wallet, in its current form, uses Host Card Emulation to produce a wireless signal because Softcard's backers would not allow Google access to their phones' secure element, citing security concerns. HCE was introduced in Android 4.4, nicknamed KitKat, in 2013.
The marketing boost the carriers provide will position Google well against new competitors operating on the Android platform. In particular, Samsung is expected to debut a new mobile wallet based on technology from LoopPay, which it is buying.
Some more of that competition is expected as soon as next week because Samsung is planning to reveal a mobile pay option in the wake of its plans to acquire LoopPay.
Google employees are said to be testing a payment method called Plaso, a cloud-based system in which consumers authorize payments by providing their initials to a cashier.