Restaurants divided on mobile payments platforms

Gartner Group researchers are forecasting the worldwide value of transactions concluded using mobile-payment technologies will nearly quadruple by 2016, but that the platforms businesses use to enable such payments will remain fragmented in the near term. That fragmentation is currently visible in the restaurant industry, where companies are adopting or testing a variety of mobile payment platforms, including Square, the Isis Mobile Wallet and MCX.

Gartner anticipates that the value of worldwide mobile payment transactions will rise by 61.9 percent this year, to $171 billion, and will average 42-percent annual growth between 2011 and 2016. "We are forecasting a market worth $617 billion with 448 million users by 2016," Sandy Shen, the company’s research director, said in a statement earlier this year.

Lee Holman, lead retail analyst for technology research house and consultancy IHL Group of Franklin, Tenn., noted that though there may be some additional security skittishness on the part of consumers involved, the development path and growing use of mobile payments appears to be similar to those of bank ATMs, store self-check-out and in-business kiosks, all of which “started slow, grew steadily and continue strong today.”

The growing number of leading foodservice companies that have attached their names to mobile technology suggests operators are interested in leveraging mobile payment technologies, according to Holman. Starbucks, for example, has partnered with payment technology company Square for mobile payments.

Beginning this month, customers at about 7,000 company-operated Starbucks locations in the U.S. can use software and services from Square on their smartphones to buy coffee, snacks and merchandise — in addition to using Starbucks’ existing iPhone and Android mobile applications. Customers using the Pay With Square mobile app tie the software to one of their credit cards and then pay by passing a barcode on their smartphone in front of a scanner at the register. Back-end tools tie the transaction to the card on account.

Beyond Starbucks, however, other big chains have yet to adopt Square for mobile payments. "I think they have the early mover advantage. One might compare them to Diners Club [versus American Express and Visa], and it remains to be seen how well they can scale and how long they can maintain that position," Holman says of Square's viability in the restaurant industry. "Yes, they are viable for the time being, and yes, they will benefit from Starbuck's system, prestige and money."

"Starbucks is not a typical merchant and its customers are not typical examples of the shopping behavior for other food and beverage providers," noted Randy Vanderhoof, executive director of Princeton Junction, N.J.-based Smart Card Alliance, a nonprofit association working to stimulate the understanding and adoption of smart card payment technology. "I would look closely at what separates the Starbucks example from what underlying benefits other merchants may expect [from this technology]."