As I toyed with ideas for this month’s column, I found myself returning to various news reports over the past year about the rapid strides being made in the technology for cashless payment transactions in the retail environment.
The accelerating number of systems that employ various smart phone barcode, pin number or reader strategies is truly amazing. And the anticipation that at least one of these approaches will suddenly take off in foodservice, especially among Millennial generation consumers, has had retail marketers salivating for years. Right now, many are betting that 2014 will be the year we begin to see a transition to the “new cashless economy” start to happen in a big way.
It’s a technology and lifestyle trend with far-reaching implications for retail vendors, onsite operators, consumers, POS vendors and, not least, financial institutions that are so invested in the credit card systems that have dominated cashless transactions up to now.
Consider the amazing growth of Square, the company that uses small, postage stamp-sized card readers that plug into smart phones and tablets. Introduced only three years ago by Twitter co-founder Jack Dorsey, Square readers were mostly a novelty when first introduced, but now are disrupting many traditional payment systems and enabling even very small businesses to accept cashless payments easily, anytime and anywhere.
Starbucks was an early adopter of Square’s technology, seeing it as a culture-friendly innovation that fit well into Starbucks’ youth-oriented and casual hangout model.
Square is basically giving the readers away, counting on a 2.75% per transaction fee to finance its business model. But the reader was only the beginning. Square has followed up with Square Wallet, Square Stand, Square Market and Square Cash, all disruptive retail payment and transaction innovations in their own right. Most recently, Square announced a partnership to integrate its data streams with Intuit’s software, the maker of Quicken.
Square’s dramatic growth has not been lost on others. Just for starters, online retail giant eBay/PayPal has last year introduced a competing card reader in the shape of a triangle that’s called PayPal Here. PayPal’s huge presence in the online retail marketplace makes it an immediate and powerful player in this developing cashless future. (It’s worth noting the company has been experimenting with such systems in its own headquarters’ dining operations for some time).
Google Wallet is a direct competitor to PayPal. It has been refining various cashless payment capabilities since Google Wallet was introduced in 2011 and also is compatible with near-field communications (NFC) technology, which allows users to tap a smart phone on a register or terminal to instantly complete a cashless transaction.
Many thought NFC might come to dominate cashless payments, but the failure of phone and technology companies to agree on standards put NFC use on hold. It now looks like even newer approaches have a better shot at that role.
One, using branded smart phone apps and cameras to enable direct payments to retailers from PayPal or other accounts, provide even more open ended capabilities. These include the ability to execute advance ordering and payment for takeout meals, self-service payment from restaurant tableside and other options. Starbucks (again!), Subway and Chipotle are already offering these to customers, and other chains are undoubtedly ready to take the leap.
It is not hard to see the implications all this has for onsite. College foodservice already has a huge population of smart phone-using customers, tight relationships with restaurant brand franchises and a well-developed cashless infrastructure. B&I, dominated by large management companies with sophisticated corporate IT departments, are undoubtedly looking at how such systems will fit into marketing and strategic plans.
Obviously, I am only scratching the surface of this subject. But here are a few links about the historical development of cashless technology and some speculation about where it will go from here…
• Mobile Payments and the 'Wow' Factor: Q&A With Square CFO Sarah Friar
• Easy Mobile Payments Are Almost Here
• The Future of Money: The Cashless Economy—Part I
• The Start-Ups Trying to Kill the Credit Card
• How Does PayPal's Triangle Shape Up Against Square?
• The Future of Money: The Cashless Economy—Part II