A New Breed Of Apps Could Completely Change The Way We Pay In Bars And Restaurants

Source: http://www.businessinsider.com/a-new-breed-of-apps-could-completetly-change-the-way-we-pay-in-bars-and-restaurants-2014-9

The success of apps like Uber and Seamless provide a powerful template for how we may soon pay for even more things in the physical world.

Car-hailing app Uber enables users to pay for a car service entirely within the app, for example. The company generated about $1.2 billion in US revenue in the last year, according to BI Intelligence estimates. And Seamless has made a comparable impact on food delivery. 

But Uber and Seamless are just the beginning. While still nascent, a new breed of apps like Cover, Dash, and even OpenTable is taking mobile commerce into stores and promising to revolutionize the way we make payments at restaurants and bars. These apps provide an alternative way for mobile payments to take off, eliminating all need for outside hardware.

In a new report from BI Intelligence we take a close look at these apps, the advantages they provide to both consumers and merchants, and why they could gain more traction than any other mobile payment technology on the market. 

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Here are some of the key takeaways from the note. 

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• Apps like OpenTable, Uber, Seamless, and Dash blur the line between mobile commerce and brick-and-mortar payments. They allow users to order and pay for physical-world services entirely within an app. A user makes smartphone payments without any interaction with a payment terminal, making the experience similar to pure mobile commerce (e.g., ordering something on Amazon through your phone). 
• Restaurants and bars are uniquely suited to accept payments from these "phone-only" payment apps. Unlike Apple's Apple Pay system, which relies on supplementary technology (NFC) on the merchant side, these apps don't require a payment terminal at all. Consumers spend less time waiting for servers and bartenders because they can pay through their phone, while merchants provide service that is more efficient at a lower cost.
• While still nascent, we think mobile commerce will also eventually be used beyond the service industry and be adopted in certain physical retail environments. For example, some small businesses might one day accept payments from the Uber app for in-store purchases. However, in large retail stores app-mediated payments might not work, because it will be difficult in high-volume settings to determine whether specific customers have made their payment or not. 
• We think mobile-commerce apps are going to shake up the entire payments industry. These apps pose the biggest near-term threat to legacy processors that help businesses accept credit card payments, and if they gain mass adoption they could eventually replace legacy payment terminals in restaurants as well. The US restaurant industry's food and drink sales are projected to reach $683 million in 2014 (as a point of reference, 37% of US retail establishments are restaurants and bars).

In full, the research note: 

• Analyzes why mobile in-store payments have yet to take off and how phone-only apps provide enough value to consumers and merchants that they could overcome these hurdles. 
• Identifies three ways that phone-only apps could increase their potential for success. 
• Describes how four phone-only apps work, along with pictures detailing important features. 

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