Consumers shifting to mobile payments

mobilepaymentstoday.com

Much has been made in recent weeks about where emerging mobile payments technologies stand with the restaurant industry. Apple turned up the volume with Apple Pay, leaving many in the industry wondering whether that system will lead to mass consumer adoption. 

It's enough to make any restaurant operator dizzy.

But the trend can't be ignored – research firm Gartner estimates that mobile payments will top $720B by 2017, up from $235B last year.

"This is where the consumers are going and you gotta go where the consumers go," said Todd Ablowitz, president of Double Diamond Group. He, along with Protein Bar founder Matt Matros and LevelUp COO Michael Hagan offered their perspectives on the benefits of mobile payments during the recent Fast Casual Executive Summit in Denver. Fast Casual is a sister publication of Mobile Payments Today. 

One piece of a larger puzzle

Hagan said although there are complexities with mobile payments, and a relatively low adoption rate at this point, it is just one mechanism to get to where you want to go in your business.

"It also gives you the ability to access data by making it simple for customers to pay while tied to a loyalty program," Hagan said. "Making data easier is key. There is also a cheaper interchange in some instances and an ability to increase security in payment."

These are some of the reasons adding a mobile payments platform was a "simple" decision for Matros, even though he describes Protein Bar as "low tech."

"We wanted to make it easier for guests to give us their money. It was a no-brainer," he said. "And because of the data, we now know when they're coming and what they're getting."

Protein Bar is five and a half years into its program and 12 to 15 percent of its customer base now uses the app.

Hagan said such apps should have more features than just payment, notably loyalty.

"With the loyalty and payments combo, we've seen some pretty powerful stats, like 10-to 18-percent lifts," he said. "This is why (Starbucks CEO) Howard Schultz brags about what his mobile payment app is doing for his bottom line every quarter."

Barriers to adoption

There are some hurdles with the relatively fledgling technology. Matros said choosing a provider is difficult, since many companies are new. (Protein Bar went with LevelUp).

"We wanted to make sure we had someone who was around the longest and that this was a full-time thing for them; that they didn't just kind of dabble in mobile payments," he said.

Lack of education or familiarity is also an obstacle. Many customers are apprehensive about putting their credit card information into their smartphone devices, particularly with a rise in security breaches at major retailers.

"Mobile payments offers more privacy and security, but that stuff isn't as important to millennials. Security never sold food," Ablowitz said, adding that the increasing number of players in the space is adding to the confusion.

"There are a lot of giant business entities fighting over this and now that Apple has made the move, battles will be decided. Expect Google to create an experience that looks just like the Apple experience," he said. "(Apple's) innovation (with tokenization) has made it very, very secure and intuitive."

Apple's evolution expectations

Still, Apple's launch doesn't signal the end of the game with an automatic winner. Hagan said it's telling that Starbucks isn't partnering with Apple Pay.

"Why would the most successful mobile payment option in the restaurant space, with probably the best demographic, not be on state with (Apple CEO) Tim Cook for this announcement? Because Apple Pay and Starbucks innovations are two different things," Hagan said.

Starbucks' innovation is with its ability to combine loyalty that enables payment in a one-touch solution. Apple, conversely, doesn't enable a one-touch solution for restaurateurs.

"We believe Apple will change things, but it will take time," Hagan said.

In the meantime, that loyalty piece makes a big difference. Matros said it comes first, followed by payments, because "remarketing is the most important tool for us."

What should operators be thinking about right now?

To approach a mobile payment initiative, it's important to make sure your guests want it, that you have the right infrastructure in place to support it and that you have a plan for the data you can collect.

"If you're just doing mobile payment as a 'me too,' then you're already not doing it right," Matros said.

You also have to decide what type of platform you want. Wendy's, Burger King and Chick-fil-A, for example, have all gone with a preloading system similar to Starbucks. But Starbucks has advantages those other brands don't: "Coffee is habitual and habitual daily," Hagan said. "If you're going to preload, you have to make sure you have a customer base that is loyal enough."

Once your system is in place, it's important to decide what to do with all the data gathered from the app through your POS system. Matros said Protein Bar "knows everything" about app users, including what time they come in, what location, what they order, how much they spend, etc.

"I think we underutilize the data but we use it to send specific specials to people or announce when a location is closed, for example," he said.

Hagan encourages operators to "figure out" their POS system first to ensure a consistent and efficient experience. Also, figure out what other features you want to tie into the payments platform before deployment, and recognize that any obstacles are outweighed by advantages and potential.

"Mobile payment is not going to be for anyone, but it can be a powerful tool, specifically when tied to loyalty and other incentive-based programs because it gives you such good data," he said. "Plus, mobile's not going away. I can't imagine a future where things aren't moving entirely to mobile devices."