The consolidation game in the mobile payments market

| by Rob Stringer
The consolidation game in the mobile payments market

Caveat: My mom always told me that if I didn’t have anything nice to say, don’t say anything at all.

  • Samsung buys LoopPay 
  • Google buys Softcard
  • PayPal buys Paydiant

Samsung buys LoopPay

The first transaction (in order of announcement) was almost two weeks ago when Samsung (the one in South Korea) announced its deal with Boston-based LoopPay.  Some pundits have been heralding this move as a home run for Samsung, as their S6 is coming out with Samsung Pay that works on NFC and with many traditional (in the U.S.) mag stripe readers thanks to LoopPay’s MST (magnetic secure transmission) technology . At best, this is a technology play that is a band-aid for the few years remaining in the life of mag-stripe readers in the U.S., but it has the benefits of getting Samsung in the news. And as a technology, it mostly works, at least in the U.S.  The jury is out on if the technology and team can maintain any momentum as the world becomes EMV-ready and tokenization becomes more the norm. Never mind about non-payment use cases where this technology is no longer applicable.

Google buys Softcard

Right on the heels of the Samsung news, Google announced it bought Softcard. I covered the Google/Softcard deal last week, but recent, additional activity has put that deal in a new light. I still stick by my original opinion that the deal was a win-win for both companies (and their backers) in that Softcard gives Google some interesting IP, in addition to a strong channel partner in the MNOs in the U.S. to help drive Google Wallet, and the now launched Android Pay (which will provide the backbone of the new Google Wallet – eat your own dog food…).

Google and Softcard want things to work out with the card networks as both "wallet" solutions worked hard to provide merchants with card-present rates. Neither company is trying to overthrow the existing hegemony. They want to work within it and make money doing so. It’s a nice arrangement, that, if parlayed right, could land Google a leading role in shaping how people around the globe consume content and electronically interact with each other in a secure, safe, and private way; and it gives the U.S. network operators that owned Softcard a partner who is more willing to bring them in on future deals. 

The Softcard technology could also fit with Android Pay’s APIs that reportedly can utilize the Android implementation of HCE to pull payment (or authentication) data from either the secure element or some other host.  All they have to do is tokenize the payment credentials in the SE for Softcard implementations and they’ll have a fully agnostic and flexible payment platform that can run off-line (on select devices with an SE), or as software-only with a cloud connection.

Now, while Google bought Softcard for around $100M as an investment in the Internet of Things, payments, and full-on host tokenization, PayPal reportedly paid close to $300M for Paydiant.

What does PayPal get for its money?

PayPal buys Paydiant

Softcard is a technology that is based on a secure element embedded on the user’s phone that stores approved credit card information for use in an NFC contactless transaction at select merchants. Those merchants get card-present rates with Softcard. Paydiant’s technology is based on either the consumer or merchant showing a QR code to the other when it comes time to pay, and having the other scan it to complete the purchase, with all credit card details stored in the cloud. Merchants get card-not-present rates when they use Paydiant’s applications. 

PayPal buying Paydiant is an interesting marriage, especially in the context of all that’s going on in the market now. PayPal is in the throws of announcing layoffs in its POS department, so why not repurpose that money in to buying a POS software enablement company?

PayPal has been struggling to migrate its online users to offline with forays into PayPal Here for small merchants, an ill-fated partnership with Discover, to its never-really-launched Beacon product. Will buying Paydiant, maker of a white-labeled mobile payments platform, bring them back into the game for offline transactions?  

PayPal is buying the relationships Paydiant has built up through its partnership with MCX, in addition to partnerships with merchants, POS integrators, etc. The company is also hoping that the technology and applications will serve as viable alternatives to other mobile wallet providers, like Samsung Pay and Apple Pay, both of whom are strategically aligned with the card networks. PayPal has never had a good working relationship with any of the card networks, save Discover, so the fact that Paydiant merchants only get CNP rates doesn’t worry PayPal. They can subsume those payments into the PayPal umbrella and call it a day. The real interesting thing comes when you start to think about PayPal and MCX teaming up through Paydiant to take on the card associations.

Paydiant has been slogging through the pay-in-store mobile wallet space for years now (since 2010). It could be considered the old man in the relatively new space. Unfortunately, Paydiant’s technology shows that it was developed before the industry matured. Yes, the company was able to secure a deal with MCX to power their highly anticipated mobile wallet app, CurrentC. But now that Apple, Samsung, and Google have all gotten into the game, Paydiant’s platform seems archaic in comparison. Certainly, Paydiant’s investors enjoy a payday with the acquisition. But wealth can be fleeting. Can PayPal really help drive Paydiant’s core technology to the next level, and more importantly, outside U.S. borders? Or is this just buying the Rolodex and hoping the ancient proverb, “the enemy of my enemy is my friend,” holds true?

The two key players to watch in the PayPal/Paydiant/MCX saga that remains in the background are Discover and the major merchant acquirers. Discover has yet to launch with Apple Pay, even though they have played lip service to doing so. Discover has strong relationships with some of the merchants that own MCX, and a strong history in working with PayPal. Could the Paydiant move be PayPal’s way of opening up the Discover rails for MCX?

Major merchant acquirers however, could throw water on any party here. Except for a select few merchants who route their own transactions, the acquirers could stand in the way by black-listing Discover BINs that try and run through their gateways and processors without paying the dues the acquirer thinks are their right (or that Visa wants them to).  It’s all speculation at this point for those of us not in the deals themselves, but I think all three deals that were announced in the past two weeks make sense for the parties involved -- to a point.


  • Samsung gets its name in the conversation, and will get a short-term boost from leveraging the MST technology in its flagship phone (assuming the provisioning and payment applications live up to expectations).
  • Google solidifies its distribution network through Softcard while providing application developers with maybe another secure place to store and access sensitive data (that will hopefully be tokenized).
  • PayPal couldn’t wait to organically grow its off-line business so they fast-tracked themselves with the prettiest belle of the ball that had the most (and biggest) merchant partners under contract (at least for the next few months).

Rob Stringer is the vice president of marketing and marketing development for Cortex MCP. Prior to Cortex, Rob headed up Marketing, Product, and Client Services for ROAM Data. He was responsible for all product roadmaps, marketing initiatives and client engagements for ROAM, helping them secure their series A and B rounds of funding.

Topics: Card Brands, Carriers / Operators, Contactless / NFC, Handsets / Devices, In-App Payments, Mobile/Digital Wallet, Trends / Statistics

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