There will be 6.1 billion smartphone users by 2020. While the adoption of mobile pay has been slow in the U.S., with only the recent passing of EMV regulations, the standardization of paying for everything with your mobile phone is inevitable.
So how can you prepare for the coming shift? In this post we’ll tell you everything you need to know about mobile pay and how you can implement it in your restaurant.
Types of Mobile Pay
A mobile payment has taken place whenever a consumer has paid for a product or service through a smartphone. But mobile payments exist in many forms, and there’s isn’t a single definition as to what constitutes a mobile payment.
Here are eight types of mobile payments:
1. Mobile Card Reader
A mobile card reader is a piece of hardware that plugs into phones and tablets. While the customer is still required to pay by card, they can swipe, insert, or tap their credit card onto a mobile card reader to pay for goods and services.
2. Mobile Wallets
Mobile wallets replace physical debit and credit cards by syncing a person’s accounts to a smartphone, tablet, or other smart technology. Similar to tapping a credit card onto a device, consumers tap their phone using near field communication (NFC) or QR codes.
3. Near Field Communication (NFC)
NFC allows two devices in close proximity to exchange data. The consumer’s NFC-enabled mobile wallet is waved over an NFC-enabled mPOS and cha-ching! Money is exchanged.
4. QR Codes
Similar to NFC, QR codes require the tap of a smartphone to exact payment. QR codes are more complicated for customers, who need a special app or a picture of the QR code to transfer money. While more cumbersome than NFC, QR codes can work on any smart device.
Mobile payments are completed through a POS system that accept a consumer’s payment when they tap their phone to the screen.
6. Smartphone-Based Transactions
This is a general term for when customers send money or purchase goods and services using an app on their smartphone.
7. Closed-Loop Systems
Owned and operated by a business or restaurant, an example of a closed loop system is one that allows the customer to buy a meal using the restaurant’s app and pick it up without a line. We see this most often in pick-up and delivery apps.
8. Carrier Payments
These are the oldest form of mobile payments. Carrier payments involve making a purchase through your device, often via SMS. The amount appears on your cellphone bill rather than on your credit card bill.
The Rate of Adoption
While we’re not quite there yet with complete adoption, the mobile payment boom is expected to happen before 2020. BI Intelligence expects in-store mobile payment volume to grow from $75 billion in 2015 to $503 billion in 2020.
At the helm of this change are mobile POS (mPOS) devices. BI Intelligence also predicts that “there will be 27.7 million mPOS devices in circulation in the U.S. by 2021, up from just 3.2 million in 2014.” More mPOSs means more power to business owners to easily adopt new payment methods, like mobile wallets.
Most importantly, consumers are going to expect mobile payment as an option. A recent survey by Accenture found that “consumers expressed optimism about mobile wallet adoption in the future, expecting a nearly 60% increase in the use of mobile wallets by card networks.”
And as we’ve seen with the rise of pickup and delivery apps, when technology enables convenience and more users begin to take advantage of that convenience, usage tends to increase exponentially.
Millennials, of course, are leading the charge with the adoption of mobile payments. According to a study by Urban Airship, 67% of tech-loving millennials have used a mobile wallet within the last three months, compared to 51% of Generation X survey respondents.
While mobile wallets have yet to become mainstream from a number of reasons – including a slow-changing mobile infrastructure, EMV rules, inconsistent user experiences, and ingrained behaviour – it seems most reports agree on one thing: the saturation of mobile pay is imminent.
How Mobile Pay Will Benefit Your Restaurant
While new technology can sometimes spark apprehension in the hearts of busy restaurateurs, mobile payments also offer several benefits that can, in the long run, make it easier for you to run your business – and increase your profits. On top of the fact that diners will simply expect to be able to pay for meals with their smartphone, here are two ways mobile payments will affect your restaurant.
Restaurateurs will be better able to offer and market exactly what consumers want due to greater trackability and analysis of consumer behavior. Custom marketing and proximity marketing will mean that “retailers can target their customers whenever they’re in proximity to your business. If you have a restaurant, you could send customers a coupon as they approach the restaurant.”
According to the National Restaurant Association, “Mobile payments can drive increased customer adoption of your loyalty program and provide seamless in-store redemption of campaigns along with greater trackability. Other benefits include increased visits from preloaded funds and training your customers to use your app for purchases, giving you a valuable active user base ready for your next innovation.”
What’s more is that the die-hard restaurant marketing staple, the coupon, will be revolutionized. No longer will customers be required to print and present tangible coupons, but they’ll present the coupon on their device and it will be applied automatically. With loyalty programs built into the payment process, customers will feel more loyal to your business.
So What’s the Hold Up?
While some forms of mobile payments, like banking apps for everyday transactions and the use of mobile card readers, are taking off, the whole “pay by tapping your phone” shtick is having trouble sticking. Why? Here are four issues the mobile payment ecosystem will need to overcome before the process becomes standard.
Habit: We’re just used to carrying cash and cards. Phones were once for talking, now they’re for Facebook stalking, Google mapping, and ordering food. As a culture, we’re still adjusting to their power.
Contactless Credit Cards: Customers are happy with their new(ish) tap cards, which accommodate tap technology while looking like our old standard credit card.
Trust: Customers have a hard time wrapping their minds around cellphone and payment security.
Slow U.S. Compliance: While the Canadian market is better positioned to see the trend take hold, the U.S. has been relatively slow to adopt things like chip and pin cards and EMV compliant payment processing devices. The jump to EMV and the mobile wallet without the tap is quite a large one to make.
How to Implement Mobile Pay at Your Restaurant
Many restaurateurs are faced with whether or not to take steps to implement mobile payment when only a fraction of their consumer population is using it. But with 75% of smartphone users accessing mobile internet services from their smartphones, it’s no longer a question of if mobile pay will replace cash and card – it’s a question of when.
So better to start now and be prepared! Here are four things to check off your list when you’re implementing mobile pay into your payment scheme.
1. Choose an MPOS System that Supports All Types of Mobile Payments
Whether you choose to use a mobile card reader or accept payment by Apple Pay, your goal in choosing a POS provider should be to find one that accommodates any type of payment, including the swipe of a magnetic stripe, NFC/contactless payments, and mobile wallets. This means the POS you choose should be up-to-date with the latest in payment technology, whether EMV, mobile wallet, or tap.
2. Choose a Payment System that Integrates with Other Analytics and Loyalty Features
Tracking daily totals isn’t enough. You’ll want a mobile payment system that gives you visibility into recurring purchasing behavior, total revenue, and other micro-insights for sales analysis, inventory restocking, and accounting.
3. Make Sure You’re Covered with Complete Security
Your mobile payment should prioritize security. One of the reasons mobile payments haven't taken off is because of concerns with security. When you’re using a mobile payment strategy and collecting data, ensure that all systems involved in the payment process come with complete security.
4. Your Provider Should have a Proven Track Record and Ability to Quickly Adapt to Change
Your provider should have all the necessary EMV certifications and features in addition to a roster of satisfied customers who can vouch for their security and operations. Mobile POSs also have a greater ability to quickly update their apps to meet the latest security standards, tech developments, and product integrations.
While mobile payments continue to evolve, one thing is sure: restaurants must soon arm themselves with highly adaptable, scalable, and secure tools that will meet forthcoming consumer expectations. When you’ve prepared for the inevitability of mobile payment, your restaurant will be ready to respond to advancements in consumer behavior without disruption to your service.
About the AuthorMore Content by Jackie Prange