Mobile payment usage through smartphones is expected to more than double from the end of 2014 to 2016, according to a recent study by Juniper Research. The number of “mobile wallets” is projected to reach 200 million by the end of 2016.
As this technology becomes more common, restaurateurs need to know how these applications work, the difference between mobile wallet providers, and how to take advantage of the new opportunities that mobile payments provide.
Mobile payment systems store user credit card information and use the near-field communication (NFC) chips in smartphones to let users make payments wirelessly.
When a user makes a purchase, a unique tokenized code is sent from the smartphone to the point-of-sale terminal to process the transaction. This also prevents the credit card number from being shared with the merchant, which increases security and protects against data breaches.
As Mobile Payments Today notes, “brands are recognizing that not only do mobile payment apps enable quick checkout, but options like online ordering and order ahead can increase revenue, and including real-time loyalty rewards and special offers can spur stronger brand engagement.”
Research by CNBC found that mobile payments can also lead to higher tips, which benefits your restaurant’s wait staff. Since customers aren’t counting out physical dollars and cents for gratuity, they are more likely to tip a higher percentage of their bill.
Apple Pay was launched in September 2014, and has already amassed a network of 220,000 merchant locations across the country. On the iPhone 6 and newer models, the transaction is completed by pressing the fingerprint sensor as an extra level of security.
Current Apple Pay merchants include:
The following establishments will offer mobile pay by 2016:
Note: merchants that accept Apple Pay are also compatible with Android Pay and Samsung Pay.
Apple Pay is only available through the iPhone 6, and according to Cult of Mac, the NFC chip added to the iPhone 6 only works with Apple Pay, locking out other uses for the technology, such as speaker pairing.
Samsung Pay uses the same NFC payment method as other mobile pay systems, but it is also compatible with regular swipe-based card machines. Magnetic Secure Transmission (MST) technology created by LoopPay, a company that Samsung acquired earlier this year, makes this possible.
Newer Samsung products like the Galaxy S6, Galaxy S6 Edge, Galaxy Note 5, and Galaxy S6 Edge Plus all are all MST-capable, which allows those devices to work at wireless and traditional payment terminals in the U.S. – in other words, almost everywhere. In a comparison to Android Pay, Gotta Be Mobile found that this additional functionality was a notable improvement over Google’s offering.
Google rolled out Android Pay in September, which took the place of Google Wallet. The app was redesigned to compete directly with Samsung Pay and Apple Pay.
While the LoopPay integration makes Samsung Pay functional at more locations – and Apple users typically shudder at the thought of using a Google product – Android Pay has a couple of unique benefits. First, unlike the proprietary mobile payments methods listed above, Android Pay is available to anyone willing to download the application.
Second, Android Pay’s Smart Tap technology uses a phone’s NFC chip to transfer more than just payment information. It also syncs with data from loyalty programs and rewards, as well as discounts, coupons, and other offers connected to the transaction. (Apple and Samsung have been slower to roll out such a system, though they’re starting to catch up.) Google believes that this data will improve the relationships between merchants and customers, making Android Pay the mobile payment method of choice.
The competition for mobile wallet market share is fierce. Among these three options, though, we like Android’s approach the most. By integrating loyalty programs and other information, Google is promoting a relationship-centric approach that improves the interaction between the merchant and the customer.
Top image: Halvard Lundgaard