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By Noah Glass, CEO of OLO
“If you build it, he will come” is the ghostly refrain Ray Kinsella hears as he walks through his Iowa cornfield in the 1989 film classic “Field of Dreams.” The mantra has long been a favorite of entrepreneurs and innovators as they try to convince investors and consumers to adopt new technology before it has proven itself
Such has been the case with mobile payments. Technology companies are pouring research and development dollars (not to mention sales and marketing dollars) into mobile payments technology in an effort to win the “mobile wallet war.”
Yet consumers have yet to adopt mobile payments en masse. In a recent blog post about mobile wallets on LAPTOP, author Daniel P. Howley quotes Denée Carrington, senior analyst with Forrester Research, who frames the problem simply, saying, “There has to be a compelling reason for consumers to use it.” Carrington goes on to say, “There’s nothing wrong with using a credit card today. There has to be a compelling reason even for early adopters beyond just the novelty.”As one of my mentors is fond of saying, new technologies need to be more like painkillers (must-haves), than vitamins (nice-to-haves). It would seem that many mobile payment technologies are still B-12, not Benadryl.
Generally speaking, there are two main types of mobile payments/mobile wallets: (1) proximity mobile payments tied to a physical device (e.g., the original version of Google Wallet and the new ISIS platform) and (2) remote mobile payments tied to a cloud-based account and transmitted over the air (e.g., PayPal). Proximity mobile payments often utilize NFC or Near Field Communications technology, with an NFC reader at the point of sale and an NFC chip on or in the customer’s NFC-enabled mobile device, such as a smartphone. The customer taps his NFC-enabled device on the reader to pay. Exciting? Not really. What consumer pain point does tapping a phone solve that swiping or tapping a card cannot?
Skip the Line: Mobile Payments in the Restaurant Industry
When OLO launched GoMobo.com — the first mobile ordering and payment service in the United States — in late 2005, it was with the understanding that mobile payments had to do more than just replace credit cards. The service needed to provide a customer experience far better than the status quo. Recognizing that common meal times nearly always lead to peak ordering demand, which means long lines to place an order, and customized, made-for-you foods mean long waits for food to be prepared, we dreamed of a world without cashiers and mysterious black boxes. We built a platform that tied payments to a mobile communication device that could send mobile payments through the air, remotely firing a highly customized order directly into the point of sale for production in the back of the house. The customer could now pre-pay and order through a mobile device and then skip the line at the restaurant. Regular customers immediately became VIPs, avoided time-killing wait times, and got their order they way they wanted it.
This VIP experience provides a far more compelling benefit for mobile payments users than fist-bumping an NFC-enabled device. But what does it do for the restaurateur? How do mobile payments numb the restaurateurs’ pain?
Mobile payments enthusiasts highlight three major elements of value for operators:
1. Lower transaction costs
Those who make the case for lower fees often suggest that mobile payments can be linked to stored value accounts. That is, customers could prepay for credit at your store and then draw down from the deposited lump sum. Based on the tried-and-true gift card model, this has been a key to the success of Starbucks’ mobile payment app, because it provides the brand with positive working capital (the prepayment) and it cuts down on the per-swipe element of credit card interchange by aggregating many small transactions into one large transaction. While Starbucks and Dunkin’ Donuts have proven that customers are willing to preload their everyday coffee accounts, it is less clear that customers will be willing to do so for less-frequent transaction types and therefore less likely that the average restaurant chain would realize the same “lower transaction cost” benefits of mobile payments.
2. Greater customer intelligence
The argument for “greater customer intelligence” comes from the notion that, unlike cash, mobile payments can link multiple transactions back to one user and provide a customer’s transaction history that shows visit frequency and spend per visit. Brands that currently use loyalty cards may track the same data.
3. “Connected, customized, real-time marketing” (as described by Jim Edwards, Business Insider)
While lower transaction costs may be relevant, and greater customer intelligence is always nice, the real painkiller included in mobile payments is the fact that they are taking place on a location-aware, always-on communication device. When you add in the capability to build a customer profile by observing their transaction history, you have an unprecedented marketing platform: the ability to send the right message to the right customer at the right place and at the right time. If you know that Maureen is a lover of all things bacon, imagine being able to send a message about your newly released BLT sandwich right to her hip pocket as she walks past one of your stores at 12:15 p.m.
This kind of mobile consumer engagement will rewire the way restaurant brands and their customers interact. And that is a pill we all can swallow.
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Noah Glass is the Founder & CEO of online and mobile ordering provider OLO. Highlighting OLO's innovation, Glass has been featured on Good Morning America, The Wall Street Journal, ABC World News and The Big Idea with Donny Deutsch.
Topics: Online / Mobile / Social
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