Does Microsoft's Windows Phone Need An Answer to Apple Pay and Google Wallet?

Google recently acquired Softcard, the mobile payment joint venture between AT&T, Verizon, and T-Mobile. The deal will integrate Softcard's technology into Google Wallet, which the Softcard partners once blocked on most phones across their networks.

Acquiring Softcard could help Google catch up to Apple Pay and curb Samsung Pay's growth, but it also cuts Microsoft's Windows Phones out of the NFC payments loop. Google will shut down Softcard on Android and Windows Phone soon, leaving Windows Phone owners without a tap-and-pay option.

Softcard on Windows Phone. Source: Microsoft

Should Microsoft launch its own mobile payment app so it doesn't miss out on this technological shift? Or does it lack the mobile muscle to do so?

Microsoft's mobile payment effortsIn Windows Phone 8, Microsoft added the Wallet hub, which stores information from credit cards, debit cards, and NFC chips. However, those functions have to be accessed by third-party apps.

Softcard was a rare Windows Phone app that synchronized to Wallet. Unfortunately, banks weren't as keen to connect their apps. Bank of America and JPMorgan Chase recently discontinued their Windows Phone apps, presumably to support Apple Pay or Google Wallet integration. Wells Fargowill keep supporting its Windows Phone app, but it doesn't sync credit or debit card information to Microsoft's Wallet.

Microsoft basically thought these partners would do the heavy lifting. Yet they had no incentive to do so, since Windows Phones only account for roughly 3% of smartphones worldwide.

Will Windows 10 be the answer?Microsoft lacks clout in the mobile world, but it's still the 800-pound gorilla in the PC market. Therefore, the upcoming launch of Windows 10, which will unify its phones, tablets, PCs, and Xbox One under a single OS, represents a golden opportunity for Microsoft to reboot its mobile payment system.

Source: Microsoft

Once all Microsoft devices can access the same "universal apps," it will be easier to launch a single Wallet app for smartphones, tablets, PCs, and consoles. The app can subsequently be integrated into the Microsoft accounts used in the Windows Store and Xbox Live. Meanwhile, app developers that shunned Windows Phone before might be more willing to launch payment apps that reach a wider audience of PC users.

Why mobile payments matterForrester Research expects mobile payments processed to soar from $12.8 billion in 2012 to $90 billion in 2017, thanks to rising consumer and vendor interest.

However, it's also supported by a need for more secure payments. Massive data breaches atTarget, Home Depot, and Staples revealed gaping security flawsin traditional credit card payments. U.S. credit cards still use outdated magnetic strips, compared to the more secure "chip and pin" cards used across Europe and Asia for years. Meanwhile, hackers are easily circumventing traditional data security measures.

Mobile payment platforms like Apple Pay and Softcard address this issue by storing a user's credit card information in the "secure element" of a SIM card or operating system. For example, Apple Pay stores a user's credit card information as a token, which is activated by a one-time dynamic code and Touch ID. This prevents the actual credit card number from ever being revealed by a customer or vendor.

Apple Pay. Source: Apple

Now that iPhone owners, who account for nearly half of the U.S. smartphone market, are eager to test out the iPhone 6's new feature, banks and vendors are finally rolling out NFC support. This means the bandwagon -- which Google and Samsung are also hitching a ride on -- is finally rolling out and leaving Microsoft in the dust.

Another gap to worry aboutWindows Phone has constantly suffered from an "app gap" when compared to iOS and Android. Windows Phone has about half a million apps, compared to over 1.3 million apps for both iOS and Android.

With the discontinuation of Softcard, Windows Phone owners will also suffer a "tech gap" as iOS and Android owners start tapping their phones to pay. Unless Microsoft can roll out a suitable replacement with Windows 10, its mobile devices will seem outdated, undermining its efforts to gain mobile clout against Apple and Google.

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Leo Sun owns shares of Apple. The Motley Fool recommends Apple, Bank of America, Google (A shares), Google (C shares), Home Depot, Verizon Communications, and Wells Fargo. The Motley Fool owns shares of Apple, Bank of America, Google (A shares), Google (C shares), JPMorgan Chase, Staples, and Wells Fargo and has the following options: short April 2015 $57 calls on Wells Fargo and short April 2015 $52 puts on Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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