Mobile in Dining: A Branded Approach

It seems as though consumer interest in mobile payments is growing stronger by the day. Transit has been a hot space for mPay solutions like mobile wallets abroad while the restaurant industry has seen the lion’s share of such innovation in the U.S. It comes as no surprise that these two industries are the first to be inundated with mobile wallet piloting; they both touch consumers’ lives on a daily basis and almost always take place at the physical point-of-sale (unlike shoe shopping, which can be done online).

While the takeoff of mobile payments surely warrants some excitement, we know by now that the mobile wallet component of this movement will be more about enabling coupons and deals, with payments taking place seamlessly in the background. The restaurants that deploy the most rewarding and contextually relevant deals through a mobile wallet are sure to see some of the greatest traction amongst mobile-centric consumers.

This ‘digital deals’ craze is the very reason that the stars have aligned for quick-service restaurants (QSRs) in particular, whose customers are creatures of habit that tend to frequent the same mealtime destinations. You might start every weekday with a coffee from the Starbucks next to your apartment and regularly grab lunch with co-workers at the Potbelly near your office. The high-transaction-volume-low-dollar-value nature of consumer spend at QSRs has always made the industry tailor-made for punch cards and coupons, two of several loyalty tools that can be enhanced with mobile.

With knowledge that mobile has become the preferred medium for many of their routine consumers to cash in on their loyalty, QSRs have naturally kicked the tires on app development efforts. They have strong confidence that you, the deal-hungry consumer, will not only make space for their independent app on your smartphone but also take the time to input personal information (a task that regularly ends the digital on-boarding process at other businesses) to collect rewards. And that payments thing? They’ll stuff that in their app too.

dunkin appThat’s right – QSRs don’t need third-party mobile wallets like Square or PayPal. Amidst the proliferation of mobile wallets has been the general belief that the ‘winning mobile wallet’ will include all functionalities related to marketing, PFM and social media. QSRs have laughed off that notion, opting to go a separate route that involves partnering with a white-label wallet provider. Third-party wallets like Square, PayPal and ISIS restrict what QSRs can do from a marketing and loyalty perspective. Through its store-branded wallet app developed by Paydiant, Subway can issue coupons and discounts in the fashion that it deems most pertinent and accessible to the consumer.

In this unique QSR space, the m-wallet leverage lies with the merchants. Third-party wallets face an uphill battle on the consumer adoption front without widespread endorsement by merchants. For this reason, PayPal recently announced its plans for adding QR code functionality to its cloud-based mobile wallet to meet the needs of merchants (or really their consumers) that are already operating on the barcode standard, allowing for dual wallet acceptance at checkout.

From a merchant perspective, there are only benefits to accepting a third-party wallet, in addition to the store-branded wallet – as long as it doesn’t require an upgrade of POS hardware. Acceptance of additional mobile wallets is simply a way of reeling in customers that might otherwise take their business to competing QSRs that accept the third-party wallet. Further, third-party wallets are still years away from widespread adoption and generally lack the extensive loyalty features included in a store-branded wallet.

Such is the phenomenon that Starbucks encountered when it doubled its prepaid card as a mobile wallet in 2012. Watching the ease of mobile payment through Starbucks’s branded wallet, mPOS leader Square eyed Starbucks as an ideal partner for breaking into the mobile wallet space. And rather than viewing Square as a threat, Starbucks welcomed their wallet in its shops while continuing to offer the traditional loyalty incentives through its branded wallet. Today, more than 10% of payments at Starbucks come through a mobile device.

Starbucks’s success is hardly replicable across brick and mortar chains. To understand why, I go back to the uniqueness of the QSR business and the reason for mobile wallets existing in the first place. The volume of financial transactions related to meals far exceeds any other category for most consumers. Thus, the $1 off a McDonald’s snack wrap is much more relevant on a daily basis than a 15% discount on the flat screen TV that you splurge on once every couple of years. I might use my Dunkin Donuts wallet 100 times before a deal on electronics becomes relevant to me.

mcd appWith that said, you could be the most loyal DSW shopper but would be hard-pressed in downloading their mobile app, knowing that you only buy new shoes once every six months. These types of stores may be better off finding a home in the third-party wallet. The same goes for local QSRs that lack a large-scale physical presence (I may love the pizzeria near my parents’ house in the suburbs but their app does me no good the six days of the week that I’m in the city).

It is a special combination of high frequency of visits, a large geographical footprint and relevant deals that allow QSRs to take this independent approach in mobile. There exist an infinite number of use cases beyond marketing and payments, such as pre-ordering, that mobile devices can facilitate in this space; it’s a matter of QSRs making the offerings available. And with these mobile offerings representing incremental loyalty wins for the merchant, there should be no reason why any major QSR watches from the sideline.

This entry was posted in Food & Dining, Payments. Bookmark the permalink.

2 Responses to Mobile in Dining: A Branded Approach

  1. Pingback: Mobile in Dining: A Branded Approach | Kenneth Carnesi

  2. Pingback: Mobile in Dining: A Branded Approach – Part II | Ahead of the Curve

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