U.S. restaurants' EMV migration has lagged behind other retail categories for several reasons, including the hassles of replacing centralized payment systems with pay-at-the-table routines that chip cards often require. But another reason: Restaurateurs have other priorities.

EMV's anti-counterfeiting properties address one narrow concern, but mobile and digital payments open up entirely new business opportunities, as evidenced by the recent deluge of order-ahead apps. And even this trend leaves a lot of room for innovation.

About 68% of restaurant executives surveyed by TD Merchant Solutions, a unit of TD Bank, said they don’t currently offer mobile payments. And 75% said they don’t currently offer a loyalty or rewards program.

California Pizza Kitchen signage
IMAGE: Bloomberg News

“Restaurants are dealing with a lot of pain points with respect to payments, mobile and loyalty and most of them are still in the very early stages of finding solutions,” said Doug Mearkle, head of U.S. cards and merchant services for TD Bank Merchant Solutions. TD Bank commissioned the study among top restaurant decision-makers at the International Restaurant and Foodservice Show in New York March 6 and 7, 2017, working with Prosek Partners to gather and collate the data.

About a third of survey respondents said their existing point of sale systems aren't configured to support mobile payments, while the remainder said they don't offer mobile payments because they see no need or customer demand for it.

Restaurants are taking many approaches to handle mobile payments, pay-at-the-table and loyalty, including building entirely new systems and introducing new apps.

Los Angeles-based California Pizza Kitchen (CPK) in February unveiled a new system in its 200 U.S. stores that married its existing restaurant management and payment system from NCR with a new, app-based payments approach from Newton, Mass.-based Paytronix Systems Inc.

"The omnichannel capabilities of the new CPK app, in concert with our mobile-optimized digital and social marketing strategy, allow us to reach guests on their preferred technology platform in a relevant and seamless way," said Ashley Ceraolo, CPK's senior vice president of marketing, in a recent blog post.

CPK’s in-app payment system integrates with the CPK Pizza Dough Rewards program that enables diners to earn, track and redeem purchases and rewards, and opt in to receive real-time marketing messages for in-restaurant, online ordering and takeout experiences. Diners pay by linking a payment card within the app, speeding up the checkout process by about 12 minutes, which drives more efficiency during peak hours, Paytronix said.

About 80% of CPK's customers connect with CPK via mobile devices and many already were members of the Pizza Dough Rewards program, which provided an easy ramp to migrate customers to use the app for ordering and checkout in the restaurant, and CPK continues to offer traditional checkout minus a mobile device, Ceraolo said.

Paytronix began as a specialist in restaurant loyalty and gift card programs that's steadily developing broad integrations to link restaurant chains' existing payment systems with broad loyalty programs. Other Paytronix clients include Panera Bread and Bloomin’ Brands, which operates the Outback, Carrabba’s and Bonefish restaurant chains.

While restaurants have been relatively slower to adopt EMV because food services have a lower proportion of counterfeit card fraud, as an industry restaurants are not afraid to embrace new technology.

"There's a lot of chaos and innovation going on right now with technology around mobile payments and loyalty, and many restaurants are watching examples like Starbucks and others closely and experimenting," said Robbins of Paytronix. "But restaurant operators actually are willing to take risks and they tend to be entrepreneurial at their very bone marrow, but they want to be sure before they commit to solutions."

Another company that began in the restaurant loyalty-program business that's now moving into payments is Punchh, a Mountain View, Calif.-based firm launched in 2010.

“For most restaurant chains, loyalty is fundamentally broken, because the CRM element is all hindsight-driven with people signing up later or not at all," said Shyam Rao, Punchh’s CEO. "More restaurant chains in the U.S. now accept payments through mobile channels, but the majority don't acknowledge that they know who you are or how often you visit."

Punchh got its start providing loyalty services to chains including Cici’s, Moe’s Southwest Grill, Noodles & Co. and Quizno’s and now it’s adding payments through direct integrations and partnerships with several clients. San Francisco-based payments provider Revel Systems worked with Punchh last year to service large restaurant chains.

Punchh recently combined loyalty and payments for a small, California-based pizza chain called PizzaRev and with California locations of the 1,000-store Coffee, Bean and Tea Leaf chain.

“Loyalty is taking the lead in many of the configurations we’re working on,” Rao said. “A seamless relationship between the restaurant and the consumer must come first, whether it occurs in-person, via an app, online, through a chatbot on a messaging platform—or through some future format—and payments is the piece to add on."

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