The telco-backed mobile wallet Softcard is at a significant crossroads. Though it once saw the debut of Apple Pay as an opportunity, Apple may actually be edging its rivals out of the market, and Softcard's next move will decide not only its own fate but also the strategies of the banks and merchants that could benefit from its technology.

To Softcard's advantage, its founders — AT&T, Verizon Wireless and T-Mobile — have a significant retail footprint that is used to sign up new customers for the mobile wallet, which works on dozens of Android and Windows Phone devices at the same stores that accept Apple Pay and other Near Field Communication payments.

But the company is also facing significant setbacks. It was forced to abandon its earlier brand name, Isis, which became toxic when it became more firmly associated with a violent militant group. More recently, Softcard cut its workforce and consolidated its office locations. And though the company once talked of plans to operate through the iPhone 6's NFC chip in partnership with Apple, the results of this plan have yet to materialize and Softcard no longer lists the iPhone as a supported device.

"Softcard's challenge is that telcos don't have a lot of experience at creating consumer products," said Gil Luria, analyst with Los Angeles-based Wedbush Securities.

"They are very good at selling the wireless service and know how to place it and operate networks. Whenever they tried to sell consumer services, that is when it got hard for them, and this is a good example of it."

Softcard is now seen as a potential acquisition target for another tech company, but this is not its only course of action. If one of its challenges is appealing to consumers, Softcard could instead turn its attention to banks and merchants — particularly the ones that are not pleased with Apple Pay.

Softcard uses the phone's secure element, which rival wallets such as Google Wallet do not have access to. Since carriers are the gatekeepers of this part of the device, Softcard is noteworthy for not having to deal with this hurdle.

Bankers should like Softcard's model of using a device's secure element, since banks are especially mindful of the security concerns that accompany any new technology, said Zil Bareisis, a London-based senior analyst for research firm Celent.

Since some banks have balked at Apple's terms for participating in Apple Pay, Softcard has a chance to win over those financial institutions right away.

But even this approach is not certain, Bareisis added, since the use of Host Card Emulation technology, which emulates an NFC signal, eliminates the need for access to the secure element. "A lot of issuers looking to incorporate a wallet look at that and ask why they would need the telco operators any longer," Bareisis said.

A sale of Softcard might be a more immediate solution to its woes, and already there are reports that it is considering selling itself to Google, which has its own NFC-based mobile wallet for Android devices.

It's common for a smaller payment initiative to be prized as an acquisition target for a company with deeper pockets and more diverse product lines. Even if Softcard is struggling, a buyer might be interested in the venture's staff, its technology or its distribution footprint.

But should Softcard sell? The answer is not so clear. The current speculation around Softcard is strongly reminiscent of last year's rumors about Square, the prominent maker of mobile card readers. At times, Square was reportedly considering a sale to Apple or Google; it was also rumored to be planning an initial public offering.

Square stayed the course, however, and devoted significant energy to diversifying its revenue streams through the development of add-on merchant services and a small-business lending product.

But while Square has been quick to publicly deny rumors that it would sell, Softcard has remained silent about its plans. The company would not provide comment for this story, saying it does not respond to rumors and speculation.

As an acquisition target, Softcard could solve a longtime problem Google has faced with its own mobile wallet: the carriers' resistance to allow it to access the secure element. Google eventually solved this problem with software, but it may still see advantages to its original model, especially since Apple Pay uses the iPhone 6's secure element.

"Softcard is an opportunity for Google to catch up with Apple Pay," said Ben Katz, CEO and founder of Card.com. 

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