The telco-led mobile wallet venture Softcard has laid off 60 employees and is consolidating its offices, a sign that the company's staffing may have been oversized compared to its opportunities in the market.
"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," Softcard said in a statement provided by an external public relations company. "We believe these efficiencies will best position Softcard in the marketplace while maintaining focus on serving our market."
Softcard, formerly called Isis, got a head start on Apple Pay by launching nationwide in late 2013. It uses Android phones equipped with Near Field Communication chips to make contactless payments at the point of sale. However, its success depends on how much merchant support it can attract.
"Softcard is being squeezed by a lack of merchant acceptance," said Richard Crone, a payments consultant, adding a recent trip his company took to Salt Lake Cityan early test market for the mobile wallet revealed poor adoption. "The status was abysmal. There were stickers in the window, but a lot of the staff in the stores didn't know how to use the mobile payment system, or the terminals weren't turned on."
Payments consortia also tend to overstaff when compared to smaller startups, Crone said. A successful mobile payments startup might need about 120 employees altogether, he said.
The technology news site ReCode reported that Softcard, which is backed by Verizon Wireless, AT&T and T-Mobile, is shedding up to 30% of its total workforce, suggesting the company had 200 employees before its layoffs. Softcard's public relations agency would not disclose the company's staff size, saying it was in the "hundreds."
Besides Apple Pay, the company's competitors include Google Wallet, PayPal and the Merchant Customer Exchange, a merchant-led consortium that is expected to introduce its CurrentC mobile payment system this year.
Softcard's PR statement said competitive pressures from Apple were not a factor in the downsizing, as has been reported elsewhere, adding that Apple Pay validates the use of Near Field Communication in a mobile wallet and benefits the entire payment industry. Softcard works at the same terminals that can handle Apple's wallet, the statement said.
Softcard works on NFC-enabled Android handsets, but "Apple Pay only runs on the iPhone 6 and the iPhone 6+," said Richard Crone, a payments consultant. "So Softcard could take up everything in the marketplace."
Softcard did not provide figures on merchant uptake or payments volume on Jan. 12. In an earlier interview, Softcard marketing head Jaymee Johnson told PaymentsSource that consumers in Softcard's test markets were more active in mobile payments than in other markets. Johnson also noted Softcard has maintained relationships with major retailers including Subway and McDonald's.