March 3, 2017
By John Stewart
Mobile order-ahead-and-pay functionality has been adopted lately by restaurants ranging from Starbucks Corp. to Chick-fil-A. But with the announcement on Wednesday by McDonald’s Corp. that it will offer the service on its mobile app, the world’s largest hamburger chain could finally push mobile payments into the consumer mainstream.
At an investor-day presentation, McDonald’s officials said the order-ahead feature will be available at all of its 14,000 U.S. locations by the end of the year. As with other such apps already in the market, customers will be able to place an order anywhere, pay for it, and then pick it up at the restaurant later. To keep these orders from clogging its restaurants, however, pick up will take place curbside or in the drive-through lane, according to a McDonald’s press release. “These more efficient enhancements will speed up the process and allow more customers to pass through our drive-thrus,” the release says.
That could help the Chicago-based chain avoid the problem Starbucks has encountered with its popular Mobile Order & Pay app, which the coffee giant introduced as part of its mobile app in 2015 and now says has caused congestion in some of its stores as customers arriving to claim their orders mix with other patrons.
McDonald’s, however, is clearly looking at ways to recover lost sales and build store count. Since 2012, store visits are down by 500 million in the company’s U.S. market as many customers have defected to other brands. Up to now, the chain’s app has had limited utility, say some observers who welcome the order-ahead function.
“I think McDonald's adding order-and-pay to their app is a great idea, making it a lot more useful than the current version, which just displays deals which, frankly, don't make a lot of sense,” Aaron McPherson, an independent analyst who follows mobile payments, tells Digital Transactions News in an email message.
The hamburger kingpin is the biggest restaurant chain yet to adopt order-ahead capability (as ubiquitous as Starbucks may seem, it trails McDonald’s by about 2,500 stores in the U.S.). That could help establish the feature with consumers and solidify mobile-payments adoption and usage. While usage is rising, it’s still limited to about 25% of all U.S. consumers, according to a Federal Reserve study released last year.
The theory behind mobile order-ahead capability is that it saves time and adds convenience for customers, and in that sense competes with loyalty programs as a way to induce mobile-payments usage.
McDonald’s is offering the feature later than a number of other well-known brands, but that may not matter in the company’s primary market. “As far as being late to the party, the relevant competitor here would be Burger King, which likewise has deals only,” says McPherson. “If McDonald's rolls it out faster, then they have an opportunity here. So I don't think it's too late by any means. It could be a competitive advantage.”
This isn't the first time McDonald's has adopted a leading-edge payment technology. In 2004, it became one of the first retail companies to begin rolling out contactless payments.
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