Coming on the heels of the Samsung / LoopPay transaction last week, Google announced on Feb. 23rd that it had ‘acquired’ SoftCard and reached a ‘deal’ with AT&T, T-Mobile and Verizon to pre-load Google Wallet into Android phones. In effect, this reaffirms Google’s interest in payments, eliminates friction with the carriers and takes SoftCard out of the picture.
Along with Apple Pay, Google and Samsung now have viable in-market mobile payment solutions. Having said that, there are key differences in approach, value proposition, pricing, etc., as well as several open questions. A brief description of each service follows.
Apple Pay – Apple Pay’s card provisioning works through networks and banks / card issuers and in concert with processors. The service is gaining rapid traction with issuers although the acceptance side lags due to constraints on the number of NFC enabled terminals. Apple Pay supports tokenization and generates revenue through a transaction fee charged to banks / issuers. While currently phone based, payments functionality will extend to the watch when it is launched.
Google Wallet – The Softcard ‘acquisition’ and the pre-load wallet feature certainly puts Google back into the mobile payments business. . However given Google Wallet’s reliance on NFC capable terminals it faces some of the same acceptance issues as Apple Pay. Additionally, while Apple Pay has enjoyed success with its network / bank and issuer driven model, Google’s consumer direct experience has been mixed. This can change when phones are pre-loaded with the wallet. Further, Google has a unique opportunity to work with merchants given its advertising platform and business relationships. Google has made a major financial commitment to rejuvenating its wallet – it will be paying the carriers to pre-load the wallet and like Apple does not have an issuer fee. Transaction data leverage with merchants could be an interesting monetization opportunity to manage program economics.
Samsung – With the LoopPay acquisition, Samsung solves for the acceptance side given that the service works with existing mag stripe terminals. This is significant. On the issuer and consumer side it is unclear how Samsung goes to market – through card issuers, consumer direct or something else? Additionally, there is limited visibility into the business model. Samsung should certainly sell more phones but is there a transaction fee similar to Apple Pay? Or, issuer savings driven by increased security? LoopPay had been working on a tokenization solution, and this will now be part of the Samsung value proposition (and also support EMV cards).
While the recent Google and Samsung moves are net positive for the industry and the mobile payments ecosystem, there remain several open issues and questions:
- Consumer / merchant adoption
- Value beyond just payments
- Integration with other products / services (commerce enablement, wearables, preferences, loyalty, rewards, etc.)
- Economics – wallet providers, banks / issuers, merchants – where’s the money?
- Role of banks / card issuers – trusted custodians, customer relationship managers or utility providers?
And, finally now that Google and Samsung have signaled their newest moves (and SoftCard has exited) what does MCX do? Is there an MCX / Discover play?
Ali Raza is a Principal and Payments lead at CCG Catalyst Consulting Group