Mobile Payments: Does Local’s Holy Grail Have Holes?

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Mobile payments continue to be equally opportune and elusive. I continue to stand by my 2014 assertion: the potential benefits for businesses are huge, but I’m skeptical that mainstream consumers will alter their entrenched habits when they still don’t see cash or credit cards as a pain point.

When I say mobile payments, I don’t mean Venmo or Amazon transactions on your phone. I’m talking about using your smartphone to pay for something offline and locally. That’s where most spending happens and where the real scalability lies.

Also known as proximity payments, it includes tap-to-pay retail checkout. But to most consumers, the gestural difference between swiping a card and tapping a phone isn’t meaningful enough to alter that entrenched habit. And platform fragmentation further deters.

The ill-conceived chip-and-pin-number system could be a pain point great enough to drive consumers into the arms of mobile payments. But it also makes them wary of newfangled methods. Moreover, the gestural act isn’t as important as tangible benefits that come with it.

The closest we’ve come to that tangible value proposition is the time savings of “order-ahead,” which isn’t tap-to-pay but it’s fulfilled offline. Starbucks has been the poster child and coffee is a fitting product — a personalized, recurring order where speed is a factor.

But the Starbucks example only validates order-ahead for a limited demographic that could be considered elite or tech forward. The question is how to bring order-ahead to a broader swath of the population. McDonald’s is now attempting to answer that question.

Last month, the QSR giant launched a pilot program that lets consumers order ahead and pay within its app. It carries the additional perk of firing your order at an optimal time, based on your distance from the restaurant and speed. Think of it like an Uber ETA.

These features will be appealing if they work. But more importantly, this will be mobile payments’ true test with a large mainstream sample. If this utility-rich and time-saving use case doesn’t sway the masses towards mobile payments, I’m not sure what will.

Beyond the consumer angle, there will be merchant-facing outcomes. GPS-informed food orders are one thing: McDonald’s also wants to physically transform the kitchen to optimally fulfill mobile, drive through, in-restaurant and curbside orders.

To do that, it will have to avoid some of the order-ahead snags that Starbucks has faced. Given the lack of transparency in a virtual queue of orders — compared to a physical line that deters new customers — orders pile up and overwhelm the production line.

Though that’s created congestion in Starbucks locations, it’s a good problem to have if you think about it. Demand is outpacing supply which isn’t great but better than the reverse. Essentially it means that Starbucks is leaving money on the table.

That points to Starbucks’ Friday announcement (and my recent prediction) that it will create satellite “express” locations for mobile-only orders. They can be high-yield bare-bones kiosks staffed with a Barista and expediter that pump out mobile orders all day.

Think of it like a fast lane for people that just want quick coffee. Meanwhile they don’t degrade the customer experience in locations where the slow lane people want to sit/read/work/converse. It’s yield optimization, customer segmentation, and logistics all in one.

And that’s where mobile payments will really hit its stride. It won’t just be about tangible benefits for consumers, but impacting retail operations and bottom line. Somewhere in that semi-distant future also lie in-aisle payments and transforming retail layouts.

Meanwhile, consumer appeal will continue to be critical. And the success factor — still somehow ignored — is utility. If swaying anyone towards mobile payments, offer them something better than being unburdened from the atomic weight of a Mastercard.

Mike Boland has been a tech & media analyst for the past two decades, specifically covering mobile, local, and emerging technologies. He has written for Street Fight since 2011. More can be seen at