Huge Softcard Coup with Subway Poses No Threat to Startup Paydiant, Top Exec Says

The telco-controlled mobile-wallet provider Softcard scored a major coup on Tuesday with the announcement that the massive Subway sandwich chain will start accepting its wallet Oct. 1 at its more than 26,000 U.S. locations. When complete, it will be the largest restaurant deployment yet for payments via near-field communication (NFC) technology and comes on the heels of the wallet provider’s rebranding from Isis, the name it had used since its emergence in 2011.

But lost in the immediate news about Subway and Softcard was the role of Paydiant Inc., a Newton, Mass.-based technology startup that began working on a mobile app for Subway about a year ago. While the app, which has been available now for about three weeks, functions as a payments wallet, Paydiant sees no competitive issues with Subway’s decision to adopt Softcard.

“Our job is to help retailers do what they want to do, not get into a shooting war with anybody,” Chris Gardner, a Paydiant cofounder, tells Digital Transactions News.

Subway and Softcard have also been in talks for at least a year, and Subway piloted Softcard last year in Salt Lake City. The app’s Subway-specific features will include offers. For example, according to Softcard, users can get a dollar back on each transaction over $1 that they make using American Express Co.’s Serve card, which users can add to the Softcard wallet. The promotion is good through the end of the year.

The Paydiant app, which Paydiant built but is branded by Subway, doesn’t rely on NFC. Instead, it lets customers pay using quick-response (QE) codes at the point of sale. Subway has installed NFC readers in its stores, which lets it accept not only Softcard but any other wallet app that uses NFC, a form of contactless transmission between handsets and terminals. “Subway happens to have NFC terminals, therefore all the NFC wallets work there,” says Gardner. “We’re in the business of making sure they can do their own stuff.”

That role, he says, is what distinguishes Paydiant as Subway also adopts third-party apps like Softcard, which comes from a joint venture controlled by AT&T Inc., T-Mobile USA, and Verizon Communications. Not only do customers identify the Paydiant app as coming from Subway, the app also includes loyalty and ordering capabilities, and will add offers later on, Gardner says.

“It makes sense for [Subway] to accept other options,” he says. “On the other hand, Subway is not canceling its own app. This stuff will co-exist.”

One reason for Gardner’s optimism is the ordering function, which lets customers order ahead and pick up their meals at the store later. That capability demands close and complex integration work with the retailer’s systems. “Ordering is never going to happen within any of those [third-party] wallets,” Gardner says. “That’s the domain of retail apps.”

While Square Inc. recently replaced its own third-party mobile wallet with a product called Square Order, the jury’s still out on that order-ahead app and its prospects for widespread acceptance, Gardner says.

Paydiant can also work in tandem with third-party wallets, Gardner argues, using the wallets as a means of distributing media like coupons. “It’s the exact separation of duties we always expected,” he says. “There will always be meta-wallets you use to pay, then there are other things. We’re going to make it easy for retailers to send coupons to Passbook or Google Wallet. For us, it’s a distribution channel.” Passbook is the 2-year-old wallet Apple Inc. is using with its Apple Pay platform, announced last week.

Indeed, Gardner says Paydiant’s white-label strategy will ensure the company’s role with retailers, regardless of how many wallets they accept. “I don’t think there’s any circumstance in which retailers say, ‘I’m just going to stop building my mobile app,’”

Meanwhile, Paydiant’s employees are adjusting to new quarters in Newton, a stone’s throw from the former headquarters in Wellesley. The company doubled its office space with the move. Gardner says they’re keeping busy on projects for clients like MCX, the retailer-controlled wallet provider expected to launch next year with the brand name CurrentC.