What is Mobile Payment? The Restaurateur's Guide to NFC, Contactless & More

The way we pay for food and beverages in today’s world has been changing at a lightning pace. In the largest metropolitan areas of the country, people aren’t bringing wallets out with them — they’re bringing their phones.

As technology continues to advance, those expensive little devices are increasingly attached to our hips. Why? Because they’re becoming more capable of carrying everything we need: our payment information, our gym and commuter passes, our restaurant loyalty cards, and more.

What makes mobile and contactless payments possible at most stores and restaurants is a technology called Near Field Communication (NFC). NFC allows two devices (a mobile device and a payment terminal) to talk to each other when they’re close together, conducting a transaction and processing payment via an encrypted signal.

With the creation and evolution of this capability, consumers are increasingly using mobile payments, mobile wallets, and mobile money transfers. In fact, mobile spend is expected to increase from $207 billion in 2018 to $360 billion by 2022, according to Worldpay’s Global Payments Report 2018. With such rapid growth and adoption, mobile payments have become impossible for restaurants to ignore.

Mobile Payment Adoption is on the Rise

You might think that mobile payment (or paying by phone) is just a fad among millennials. But mobile payment transactions at the point of sale system currently account for 9% of sales annually.

One of the reasons why the adoption of mobile payments has increased is the growing popularity of mobile money transfers among friends and family. Mobile wallets like Venmo and Revolut have provided users with the ability to send and receive funds digitally from one another, removing the hassle of having to settle up with cash or with a bank transfer. Mobile money transfers digitize this activity, encouraging and normalizing the use of mobile wallets as a contactless payment method.

Just how common is it becoming? More than half of people surveyed as part of the SYS U.S. Consumer Payment Study (51%) said they’re interested in trying mobile wallets instead of a payment card.

A bit more info on mobile wallets: Mobile wallets offer a simple entry point to mobile payments, as they often don’t require a physical card or a store visit to get set up. Instead, mobile wallets can be set up straight from a user's mobile device.

And not only are mobile payments becoming normalized: They benefit both restaurateurs and their guests. For guests, there’s the convenience aspect, allowing them to quickly and easily pay how they prefer. For example, guests dining at a restaurant that uses order and pay at the table technology (such as Toast Mobile Order & Pay™) can view the menu, make orders, and pay directly from the convenience of their mobile device. And for restaurateurs, there are additional security benefits, customer loyalty incentives, and quicker transaction speeds compared to traditional payment methods.

Let's go over the fundamentals of mobile payments for restaurants and why you should consider implementing the capability in your restaurant — if you haven’t already.

1. Mobile Payments are Secure

There are some concerns about the security of mobile transactions in restaurants. Some restaurant owners believe that when payment information is accessible through one's smartphone or wearable device, they’re at a higher risk for theft and fraudulent use.

NFC — which we covered above — and EMV — which involves cards containing both a microprocessor chip and the conventional magnetic strip for swiping credit cards — provide the same levels of chargeback and liability protection. But, NFC actually offers greater security than an EMV transaction. With NFC, there’s an added level of security due to user phone access and biometric user authorization like Apple’s FaceID.

While still optimized for speed, mobile payments often require additional authentication steps for users to complete a transaction, which only bolsters security. Plus, mobile transactions aren't transmitted over the internet as you might think. This makes mobile transactions that much more secure since internet connections could be at risk of breach.

Business Insider has reported that card information is tokenized with mobile payments, "which means that it cannot be obtained and used for fraudulent transactions." This tokenization is yet another way in which NFC (and mobile payments in general) are more secure than EMV transactions.

2. Consumers (and POS Providers) are Shifting Focus to Mobile Payments and NFC

With the rollout of mandatory EMV compliance in the U.S., restaurants have been installing EMV-compliant payment devices. But while the U.S. is only recently becoming fully EMV-compliant, consumers and POS systems are already looking ahead to the future: the advantages and possibilities of mobile payments, which are powered by NFC.

Some mobile payment providers like Apple Pay and Google Pay even require restaurants to partner with POS providers that are able to offer technology for NFC compatibility. Why? Because these companies use NFC to power their contactless payment capabilities.

With Apple Pay and Google Pay, guests can simply tap their phones to a compatible POS, and the transaction is complete. These payments providers are quickly becoming the most popular methods of mobile payment because of Android and iOS device saturation in the market.

According to PYMNTS, “Just 3% of restaurants and retailers accepted mobile payments when Apple Pay launched in 2014, but that share rose to about 50% by October 2018.” And that number has only grown since.

3. Mobile Payments are Fast and Easy

EMV, or "chip-in" debit and credit cards, are more secure than the traditional magnetic stripe. But this payment method can still take several seconds to process. Mobile payments processed via NFC are immediate and processed as soon as the phone registers with the reader. Plus, a mobile payment transaction adheres to the same data protection rules and standards as an EMV transaction, with added security as we covered above.

According to Chase, customers spend 30-40% less time at the POS when using mobile payments instead of cash or credit. And they pay faster. American Express has reported transaction speeds up to 63% faster than cash transactions (no more waiting around for your guests to find that last penny) and 53% faster than credit card processing. In the same report, MasterCard reported similar time savings for drive-through restaurants — 12-18 seconds were reported to be saved using mobile payments when compared to cash payments.

Knowing just how important time is in the restaurant, the faster payment processing speeds offered by NFC keep your line moving efficiently and leaves your staff with more free time to accomplish other important tasks. Who doesn’t love that?

4. Contactless and Mobile Payments Create Loyal Repeat Customers

As we’ve covered above, contactless and mobile payments are changing how customers experience paying for food and beverages. Guests can now have the convenience to choose the payment method that’s best suited to them, increasing guest satisfaction while reducing wait times by quickly busting that line out the door.

Mobile payments also directly improve customer loyalty. Most contactless and mobile payment methods integrate directly with POS-based loyalty and reward programs — meaning that your customers can generate points/rewards every time they pay with the tap of a card or mobile device.

A customer loyalty program is a direct and personalized way to incentivize your guests. It also allows you to collect customer data and analyze the purchase trends from each individual who walks through your doors. With this data, you can uncover key insights that’ll help you better understand your customers, and in turn, reward them with something a bit more unique, giving your guests more reasons to keep coming back.

The Future of Mobile Payments in Restaurants

Mobile payments (made possible by NFC) are on the rise in restaurants and show no signs of slowing down. Customers are increasingly looking for ways to pay faster and more conveniently with their mobile devices. And the major mobile payment providers require restaurants to partner with POS providers that offer NFC-compatible technology.

Forward-thinking restaurants are already on board and using technology that allows them to accept mobile payments. But sooner rather than later, all restaurants will have to catch up in order to be successful in the changing landscape.

If you're ready to learn more about how mobile payments can benefit your restaurant, check out this page to learn about Toast Tap™ and set up time with a restaurant technology expert at Toast.

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