Google Wallet has been given a second chance at replacing your physical wallet.
Apple has Apple Pay, while Samsung has LoopPay, but Google was ahead of them both with Google Wallet. In an attempt to revive its digital wallet, Google is rolling out a new mobile payment strategy, in which US wireless providers will pre-install the Google Wallet app on new Android devices, and it's even acquired the technology behind Softcard.
What is Softcard?
Softcard - which used to be called Isis Mobile Wallet but was recently renamed to avoid any association with the ISIS militant terrorist group - is a joint venture between AT&T, T-Mobile, and Verizon. It's a five-year-old mobile payment system based on near-field communication, and it allows you to pay by tapping your mobile device to a terminal.
Why did Google buy Softcard?
Google announced it has partnered with AT&T Mobility, T-Mobile USA and Verizon Wireless in the US, and as part of that deal, it's working with the carriers' mobile payments company Softcard. More specifically, it's acquiring "some exciting technology and intellectual property" from Softcard in order to improve Google Wallet.
In a blog post announcing the acquisition, the Softcard team said its deal with Google would not only advance mobile wallets but also power the next generation of mobile payments. For now though, you can continue to tap and pay with Softcard app. More information about what's happening with Softcard will be confirmed in the coming weeks.
Re/code first reported last month that Google wanted to acquire Softcard for less than $100 million, and that it wanted to achieve a new distribution agreement for Google Wallet, which would see the app installed on Android phones.
How will the Google Wallet app change?
The Google Wallet app will undoubtedly include some of Softcard's technology one day, but it looks like the only thing immediately changing is that the Google Wallet app, including its tap-and-pay functionality, will come pre-installed on Android phones (running KitKat or higher) sold by AT&T, T-Mobile, and Verizon later this year.
Will Softcard make Google Wallet better than Apple Pay?
That's hard to say. Softcard works via NFC, stores credit card data on a user's SIM card, then transmits that data to a point-of-sale terminal for processing. That means it doesn't work like Apple Pay, which has a tokenized backend infrastructure. Apple Pay makes card payments secure by creating a number or token that replaces your card details.
The token is stored within a secure element chip on your iOS device, and when a payment is initiated, the token is passed to the retailer or merchant. The retailer or merchant therefore never has direct access to your card details. Although Softcard doesn't use tokens right now, it does store payment data on a secure element chip.
We're not sure what tech or intellectual property belonging to Softcard first piqued Google's interest, especially because Softcard is widely considered an expensive flop for the wireless companies involved, but we're assuming Softcard will help Google Wallet to standout and better compete with not only Apple Pay but also LoopPay.
That said, AT&T, T-Mobile, and Verizon might've only agreed to a distribution deal with Google Wallet as long as Google agreed to take Softcard off their hands. But that's just speculation.
Is the Softcard team joining Google?
It currently doesn't look like any of Softcard's employees will be joining Google. In other words: the Softcard acquisition is more about technology and patents rather than talent.
Want to know more?
For more details abut the mobile wallet space, check out our in-depth looks at Google Wallet, Apple Pay, and LoopPay.