What’s in Your Mobile Wallet?

mobile walletConsumer purchasing behavior in restaurants has drastically changed over the past decade, but innovation has been slow to respond. The largest shift has been from cash to credit card payments, sparking vicious debates on escalating credit card processing fees. There’s no questioning the convenience of credit cards or the benefits of their reward programs, but there are clear alternatives that will appeal to the tech-friendly consumer. The real question is whether this technology will change consumer behaviors in a significant way.

Restaurant dining is rapidly becoming a cashless experience. Last year, 81 percent of the money spent at full-service restaurants in America was charged to debit, credit or pre-paid cards, up from 72 percent in 2006 and 66 percent in 2004. With such a high discrepancy in payment types, operators are discovering alternatives that provide more convenience, better control and ultimately lower processing fees.

Starbucks recently invested $25 million in the startup, Square, an alternative payment system that allows users to pay retailers through a mobile app. This year, 7000 Starbucks locations went live with this technology and encouraged their patrons to sign up for Square Wallet. It works by downloading the app, connecting a credit or debit card and allowing a Starbucks barista to scan the phone. The digital receipt is stored in the app or sent via email.

Starbucks also allows payment through their proprietary app, which can be loaded using a credit card or gift card. Currently, a quarter of all Starbucks purchases are made using a gift card, so this integration provides the convenience of displaying the balance and the security of electronic funds. This is yet another way to change consumers’ behavior from paying directly with their credit card.

use your mobile wallet at starbucks

Most consumers know Square for its ability to accept credit cards via personal mobile phones at a competitive (and consistent) rate. Square handles the processing and there is no reseller, so the fee is transparent at 2.75 percent. However, Square is also busy building a network of retailers that accept payment through Square Wallet.

Google Wallet is a competitive product that utilizes a technology called NFC, or Near Field Communication. It’s a short-range, wireless link that transfers secure data between two devices. Google uses this technology to transfer payment from a user’s phone to a retailer’s credit card terminal. Currently, this technology is being utilized in the quick-serve and fast-casual segments, where the order process and payment are at the same station. It will only be a matter of time before NFC payments are being taken at airport concessions and then casual dining restaurants. In addition to mobile payments, Google Wallet stores loyalty card information in the app and is expanding the service to location-based offers.

The mobile wallet’s promise is to provide a better customer experience by offering more features, better security and a lighter wallet. And for the merchants, the value is a streamlined payment experience and a more efficient process.

Mobile wallets can be best described as equivalent to online banking for your credit cards. It’s a level of comfort that can only be provided through transparency and connectivity. If that is the stick by which to measure the future success, we just might lose the wallet after all.


Adam Billings

Director of Technology & Innovation at IMI Agency for over nine years, Adam Billings is the lead architect for all applications designed specifically for the hospitality channel. His expertise is cross-platform mobile solutions. He has a marketing and promotions background, as well as extensive experience in restaurant data mining.