Aps that help diners pay for meals with smartphones are still in their infancy, and several are testing the waters in major markets like Chicago, New York, and San Francisco. Promises of added security, lower processing fees, customer analytics, marketing, and increased efficiency for both customers and retailers make these apps an attractive option. Mobile payment apps have low entry barriers for restaurants (many work with existing POS systems and don't require extra equipment), and tout their ease of use for new and potential customers.
Mobile payment offerings run the gamut from chain-specific apps (Dunkin Donuts, Starbucks, Taco Bell), apps that cater more to independently-owned restaurants (Cups, Cover), and broad-scope restaurant apps (Apple Pay, Dash, Pay with OpenTable, TabbedOut). Below, a look at how some of the most popular restaurant payment apps fared in California and New York, and what the implications might be for diners and restaurants.
Apple Pay
Apple Pay is looking to bring mobile payments back from the dead. Google Wallet pioneered the Near Field Communication (NFC)-based mobile payment system in 2011, but failed to convince mobile carriers to incorporate Wallet. But Apple already has 200 million credit cards on file with iTunes, and Apple Pay is pretty painless to use.
You can sign up using the card associated with your iTunes account or using a different credit card number, which is then encrypted and replaced with a 16-digit token known as a unique device account number. This token is stored on your phone, which means your phone does not store your credit card information or share it with retailers. On top of that, this token is tied to your phone, to prevent use of your credit card on another device. Authorizing payments using Apple Pay requires Touch ID, a fingerprint sensor that prevents others from authorizing purchases, even if your phone is stolen. (Apple Pay is only available on iPhone 6 and 6 Plus models currently, but Touch ID is available on iPhone 5S.)
Apple Pay is only usable at 2% of retailers that accept credit cards, but that list includes McDonalds, Starbucks, and Subway, and is expected to grow. One of the major obstacles for restaurants is Apple Pay requires an NFC terminal to process payment, but Apple Pay is making inroads by partnering with other payment apps. For example, Apple Pay is now available as a payment option on OpenTable.
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