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Burger King bets on PayPal, digital cards for mobile payments, offers

In a bet that near-field communications mobile payments may still not be ready for prime time, Burger King has opted to power its application with PayPal’s cloud-based, PIN-driven solution.

In addition to paying via PayPal, users can also add a BK Crown Card digital gift card or activate a virtual card to pay from the app. In comparison, Burger King competitor McDonald’s recently ran up the flag for NFC payments by partnering with both Apple Pay and Softcard.

“PayPal is one of the longstanding innovators in mobile payments, and probably one of the top mobile commerce players in the business,” said Drew Sievers, founding partner at fintech investor Operative Capital.

“Competing against ApplePay on the mobile commerce side of things will likely be a good battle since they can leverage the Touch ID technology to improve the customer experience in a way that they can’t in the physical retail space,” he said.

“PayPal’s ownership of Venmo, however, gives them a distinct advantage over Apple in the emerging peer to peer payment space among millennials.”

In-store payments
The description for the Burger King iOS app says that payments and coupons are currently available in select markets and will be rolling out to additional  markets soon.

From an image in a post on the PayPal blog announcing the Burger King tie-in, it appears that users of the app will also be able to pay earn 20 percent extra points for paying with the BK Crown Card, which is similar to how Starbucks’ payment app works.

Users can store multiple cards, see balances and reload funds right from their phone.

PayPal announced at the Money 2020 conference this week that Burger King customers in the United States will soon be able to pay for their meals using PayPal in the Burger King app on iOS and Android devices.

The solution is being enabled through a collaboration with Tillster.

To pay for purchases with the app, users must first launch the app and select to pay with PayPal, thereby generating a four-digit PIN to pay at the register.

The app will also enable users to receive exclusive offers and discounts at Burger King restaurants, find the closest restaurant and browse the menu. It will be rolling out later this quarter across the United States to all locations.

Seamless experiences
The mobile payments space has been heating up quickly of late, ever since Apple announced its payments solution, Apple Pay, which uses near-field communications to complete a purchase.

At the same time, quick-service restaurants are quickly adding mobile payments solutions in an attempt to cozy up to the younger demographics who are their biggest customers and among the heaviest mobile users.

One of the biggest benefits of the Apple Pay solution is that it provides a near seamless user experience that requires a simple touch of the Touch ID sensor to authenticate a payment.

“Apple, and to an extent Google, can create the most seamless point of sale experience since they control the entire stack of software and hardware on the phone,” Mr. Sievers said.

“The Burger King solution from PayPal requires the user to open an app and then enter a PIN,” he said. “That adds precious seconds to the transaction, which puts PayPal at a disadvantage when trying to acquire high volume physical retail business clients.”

Scaling up
However, not all retailers have the necessary contactless terminals in place to process NFC payments. Also, Apple Pay does not work on Android devices, with iOS users required to have the iPhone 6 to use the payments solution.

For these reasons, Apple Pay may have a slow build over the next year or two.

In the meantime, PayPal’s solution, while slightly more cumbersome, can be used across devices by most retail locations as of right now. One of its biggest blocks is the need for consumers to have a PayPal account.

However, PayPal is working hard to attract more consumers. One area of strength in this regard is peer-to-peer payments, which are popular with millennials. Since Burger King’s core audience is younger consumers, there could be some nice crossover potential here.

Burger King said earlier this year that it was investing in building a new digital platform designed to enable it to quickly scale up with mobile offers, payments, order-ahead and other features. At the time, it said it was working with Tillster on a payments app and also said it would be the first burger chain to enable mobile coupons and offers on a national basis (see story).

Multiple winners
Ultimately, the key to a successful mobile payments strategy for Burger King and other merchants is going to be enabling as many consumers as possible to use the solution. This could mean partnering with more than one payments enabler

“One could posit that Burger King has aligned themselves with a payment partner that lacks the visceral loyalty carried by Apple users,” Mr. Sievers said. “Picking only one payment partner was something that merchants did a long time ago when cards were emerging.

“At some point, a merchant needs to support multiple tender types if they want to keep the customers coming into their stores,” he said. “This is why most stores take Amex, MasterCard, and Visa.”

“The mobile payments space is a war fought on many fronts: retail, commerce, P2P.  It’s naive and unrealistic to assume that one company will win it all.”

Final Take
Chantal Tode is senior editor on Mobile Commerce Daily, New York