Cash's Long Reign in Restaurants Is Under Attack, But Won't Go Quietly

Most consumers, when dining, still enjoy the simplicity of dropping cash on the table than using something newer, like an EMV card or a mobile wallet, even when those payment forms are becoming more commonplace in other stores.

Even fast food establishments, which were among the earliest adopters of Apple Pay and Android Pay — and supported contactless payment cards before that — deal heavily in cash to this day.

"Cash is still the dominant payment method within the quick service restaurant space and it's still quicker to pull out a plastic card at a fast casual or full service dining [restaurant]," said Gilbert Bailey, vice president of Beanstalk Engage at Heartland Commerce.

Heartland has added lots of restaurant and mobile point of sale technology through acquisition over the past year, and Global Payments is about to acquire Heartland partly to reach a larger restaurant base. Heartland's announcement this week that it purchased Beanstalk Data, which has many restaurants in its client base, furthers that strategy.

But after all of the spending on acquisition, Heartland still has a lot of work to do to actually deliver its technology to more restaurants. The company must answer hard questions as to why restaurants should change the way they accept payments when the restaurants themselves see no need to adjust.

Heartland is focusing on one area that restaurants clearly do care about: Speed. Fast food and table service establishments share a need to move customers through the payment process as quickly as possible; EMV may not serve this goal, but mobile has that potential.

"The pressure to solve for speed of payment will result in innovation," said Bailey. "As long as it is quicker to pay with cash or a plastic card, mobile payments will not cross a tipping point of adoption."

Since restaurants aren't eager to change only the payment process, Heartland and Global Payments must be able to offer a more robust range of products and services that address the restaurant industry's pain points.

"Restaurants have always been one of the most complicated use cases for mobile. The need to coordinate orders, kitchen and checkout make for a complex system in itself," said Tim Sloane, vice president of payments innovation at Mercator Advisory Group. "Add different restaurant types, such as a sushi bar, a formal sit down, quick serve, and the number of possible permutations becomes insane."

The complexity involved in running a restaurant is indicative of a need for better resource management, and smartphones can address this, Sloane said. "No doubt that's a sweet spot for Global Payments and Heartland going forward."

The Beanstalk acquisition will allow Heartland to help restaurants integrate their customer relationship management systems and marketing programs with Heartland's point of sale and e-commerce products.  

"Behind the point of sale it's the same brick and mortar store and its e-commerce site and/or its mobile phone application," Bailey said. "Beanstalk had to engineer for a completely different challenge—how to connect all of those spokes on the wheel to a central, cloud-based marketing master—a true business-to-consumer CRM and engagement platform, at scale and in real time."

There's additional benefits for processors as mobile payments in restaurants can inform initiatives in other verticals.

Mobile can increase throughput in quick serve restaurants, since NFC transactions take less than a second to complete while EMV card payments can take 10 seconds or more, said Nick Holland, a payments consultant. "From a consumer standpoint it's a tangible example of one technology surpassing another and could drive mobile payments in other areas," Holland said.

A foothold in restaurants could also pay off in other verticals, particular among smaller merchants where there's added opportunity to cross-sell other merchant products, said Richard Crone, a payments consultant.

"Smaller merchants need more services," Crone said.