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Softcard to shut down in final blow to carriers’ NFC aspirations

In an expected move, mobile payments solution Softcard will be heading into the sunset as the nation’s three biggest wireless carriers consider if and what role they can play in what is expected to be a very significant market in the near future.

Softcard, which was previously known as Isis and was founded in 2010 by AT&T, Verizon Wireless and T-Mobile USA, will shut down its mobile payments applications as of March 31. An Aite Group analyst thinks this could be the end of the carriers’ involvement with NFC payments as a platform provider.

“But for AT&T, Verizon and T-Mobile, they will be serving as hosts for the Google offering,” said Thad Peterson, senior analyst at Aite Group, Atlanta. “It’s probably safer to call them a distribution channel at this point.

Declining fortunes
The news follows Google’s acquisition of Softcard technology several weeks ago and long-running reports that Softcard was struggling to gain adoption.

As recently as the end of October 2014, Softcard was still in growth mode, with McDonald’s signing on to add tap-and-pay Softcard payments at its 14,000 U.S. locations (see story).

However, this week Softcard’s Web site is encouraging users to switch to the Google Wallet app.

Softcard users are not able to automatically transfer over their payment and loyalty cards and must sign up for Google Wallet separately. Softcard users’ information is not being shared with Google.

“Carriers still have a role to play in the direct carrier billing business, but I’d say that their ill-advised experiment in NFC-powered retail payments has come to a merciful end,” said Drew Sievers, founding partner at fintech investor Operative Capital.

The wireless carriers created Softcard in order to own the relationship with consumers in mobile payments, which are expected to grow significantly in the coming years.

Fierce competition
The carriers are not alone in wanting to play a meaningful role here.

Since its launch in two test markets in 2012, Softcard has struggled as a result of slower-than-expected adoption of NFC in general as well as because of the app’s reported poor user experience.

At the same time, technology giants such as Apple and Google explored ways to get around the carriers. Host Card Emulation, which is a cloud-based solution that does not require access to the secure element on a phone that is controlled by the carriers, was Google’s answer.

With Apple Pay, which was launched in the fall of 2014, the secure element is embedded in the handset and controlled by Apple.

As a result of these developments, Juniper Research predicted back in October of 2014 that wireless carriers would see a diminished role in NFC payments. The report predicted that just 3 percent of NFC mobile payments customers would be controlled by wireless carriers in North America by 2019 (see story).

Developments such as Apple Pay and HCE are likely to push NFC payment users to more than 500 million by 2019, according to Juniper Research.

“There are too many business hurdles for [the carriers] to overcome when it comes to the control of the secure element (credentials) and how they would get paid/fit in the payment ecosystem,” said Mark Beccue of Mark Beccue Consulting, Tampa, FL.

“There are still big issues for both Apple and Google or anyone else for that matter in terms of NFC mobile payments, but I think Apple has the best chance to tip the scales and make NFC mobile payments work,” he said.

Dominant forces
With Apple dominating NFC payments for iPhone users, Google is positioning itself to be the leader for Android users. This is why Google acquired Softcard’s technology and worked a deal with the wireless carriers to have Google Wallet pre-installed on Android phones sold by them (see story).

However, Google will face competition in trying to grab the ring for mobile payments.

This week, Samsung announced it will launch Samsung Pay this summer, which leverage NFC as well as other technology to enable mobile payments. As a result, it could conceivable be available at more retail locations than Google Wallet at launch (see story).

As mobile payments continue to evolve, the carriers will likely be looking for other ways to play a meaningful role beyond NFC.

“Mobile Money is becoming a significant economic factor in the developing world and while the banks and networks are involved, at its core it’s a payment platform delivered by the mobile operator,” Mr. Peterson said.

“I would think that they would also get into delivery of in-app solutions delivered through their networks, as well as direct carrier billing solutions for businesses where that’s a viable alternative,” he said.

Final Take
Chantal Tode is senior editor on Mobile Commerce Daily, New York