Subway's mobile payments adoption a 'market signaling event'

As the largest restaurant chain in the world, Subway's influence on the industry is unequivocal. That's why Paydiant co-founder Chris Gardner called Subway's mobile payments announcement in early October a "market signaling event."

Subway selected Paydiant to power a variety of mobile wallet capabilities — including mobile payment, offers and loyalty — in the upcoming release of its new app. It will begin rolling out by the end of this year.

"Subway is the tip of the spear. Mobile is about to happen across the QSR industry. Retailers have realized consumers want to do stuff with mobile," Gardner said. "A year from now, the big players — Subway, Taco Bell, Burger King, McDonald's — will all have some sort of mobile strategy."

Paydiant's wallet

When the deployment was announced in October, Subway's CIO Carman Wenkoff said in a news release that the chain selected Paydiant to jump into this space because "their mobile capabilities will be a key factor toward providing our customers with innovative services and an exceptional experience."

Paydiant's solution is different from Google, PayPal and Isis wallets, as it allows retailers to build their own platforms, rather than using an aggregated wallet, Gardner said. The cloud-based, white-label approach allows merchants to add mobile capabilities into their own apps.

"What we recognized is they (mobile wallet providers) want to be the middle man so they can see transaction data. If Google sees transaction data from Subway, they're going to sell that information to Quiznos. Retailers don't want big guys to see transactions and sell ads to competitors," he said.

Critical mass?

The announcement from Subway joins other recent mobile payment deployments from QSR brands such as Checkers/Rally's, Sonic and Taco John's, as well as tests from McDonald's, Burger King and Dairy Queen. The acceleration underscores what Gardner calls the biggest payment innovation since the ATM or debit card.

"The mobile opportunity is pretty special," he said. "Still, the platform is far from reaching critical mass. We have 50 years of muscle memory swiping credit cards. This means training all of us to behave differently every time we make a payment, and that will take time."

Starbucks, for example, has had its mobile payment platform in place for about three years, and about 15 to 20 percent of transactions are made on mobile devices.

"A point is consumers want to do this. But the other main point is that payment is the least important part of mobile," Gardner said. "Everyone is talking about mobile payments, but it's the stuff you wrap around it that's exciting."

The stuff wrapped around payments

The Starbucks faithful, for example, don't use the mobile payment capability because it's that much easier or faster than swiping a card; they use it to garner loyalty points.

"Other QSRs will do the same. We're starting to see loyalty programs really pick up. There will be more ordering and geotargeted offers and much more," Gardner said.

What brands offer through mobile devices will take trial and error. It will be different for every brand depending on what works for heavy-user demographics.

"The winners will be the ones who get out of the gate early, try things, skin their knee once or twice and then get the mix right for their customer," Gardner said.

He predicts the big components will be payments, loyalty, offers, mobile ordering and games.

Winning mobile

The QSR segment has been a leader in mobile payments because the platform fits well into the routine of a fast, daily-spend customer.

"More often visits mean a brand is more likely to fill that mobile relationship with its customers. Plus, it makes sense for people to order their food before they show up and grab it and go, which is what quick-service is about," Gardner said.

He also expects the grocery and coffeeshop channels to move quickly with adoption. Casual dining is picking it up, albeit more slowly.

There are a handful of benefits for brands to jump on board with mobile adoption. Gardner said research has shown that if customers have a fast, easy experience, they'll return more often. "Mobile enables fast and easy," he said.

Another clear benefit to mobile integration is big data, especially if that integration includes a loyalty component.

"If someone comes into my restaurant today, swipes a credit card and then walks away, I don't know anything about them," Gardner said. "But a mobile user — who is on their phone all the time, and who is logged into their loyalty program on their phone — will provide data when they pay. Operators can see when they're in the store, what they're buying, when they're buying it; they can then target them with special offers and get them to come in more.

"This is the most important thing about mobile for any retailer — mobile is a marketing platform. Payment is a piece of it, but marketing is how you win."

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