PayPal App – Happy stomach but more payments friction

PayPal for Food


Since the debut of the latest version of the PayPal mobile app at the beginning of September, the payments giant recently teamed up with Eat24 to entice customers to start using the app to pay for food through $5 and $10 coupons.  Using this incentive to test out the app and fill my belly with some food, I hit the streets of San Francisco over the course of a week in search of subsidized  lunches… and to that I am thankful.

What I realized is that there is still a lot more groundwork to be done, and there are aspects of getting traction with an app like this that still are not justified to the consumer unless someone is literally paying for their lunch.

  • Irregular payment processes – If you’re going to try to change behavior, it is best to have the same process from merchant to merchant.
  1. The first place I used the app was at an Indian burrito place called Tava.  I hadn’t used the app before, and so I had to awkwardly take a self picture and add it to my profile while waiting in line.  The process here was that the consumer checks in and then tells the cashier that they are paying with PayPal.  I checked in twice (logging in each time), and when I got to the checkout counter I was already checked out.  Fumbling with the app, I let two others pay before me as my lackluster portrait showed up on the tablet register and I was able to make the purchase.
  2. The next day, I decided to go to Jamba Juice for a smoothie.  I wanted to be well prepared, so I checked in outside before I even walked in.  As I approached the counter, I proudly told the cashier that I would be paying with PayPal.  “Hmm.  Not sure how you would do that”, she said.  She runs to the manager in the back, who tells me that I need to pre-order my beverage via the app.  As I stand in a corner looking up at the menu for some fresh carrot juice, the manager says,  “Oh by the way, the whole menu isn’t on the app.  There aren’t any fresh juices on there.  Kind of a work in progress.”  I order something that is on the menu, and walk away for a few minutes while they get the order and prepare it.
  • Lack of education among merchants – For most of the merchants that I visited (even those who had the little paper table advertisements displayed) almost nobody knew exactly how to take a payment, how the promotion worked and what to do in cases where there was a problem.
  1. After these varied paying experiences, I was a bit afraid to use the app for another purchase, but the call of free food beckoned.  I showed up at a small Middle Eastern restaurant, where the owner didn’t even really know how to take a PayPal order.  I figured it out myself, placed the order on the phone, and the order showed up on his register.  “You really should have tried to get the $5 off”, he said pointing to the placard next to his register.  When I tell him that I already got the $5 off, and that PayPal would be taking care of that while paying him the full amount, you could see that he wanted to start telling his customers immediately to use the app and buy more food.
  • A LOT more friction to pay with than a credit card – Had it not been for the subsidized lunches, I would have stopped using the app after the first attempt.  The number of times that I had to log-in, explain the process to merchants and try to decipher the right payment approach for each vendor was a net increase in friction rather than a decrease in my payments journey.

Overall, PayPal is going to learn a lot through these types of promotions, and the reality is that they are in a good position to figure out how to make a wallet work at the point of sale.  Payment processes can be streamlined for the customer, and merchants will soon see enough of these types of transactions to understand what it means to pay by PayPal (or Square, Google Wallet, etc.).

While there was definitively more friction in my experiences with the app than through a traditional form of payment, I can see how not having to enter card details or provide them during pickup or delivery can help reduce friction.  Unfortunately for PayPal, this is already something that Yelp is partnering with Eat24 since July of this year, and that’s a more likely place for me to look for food.  The other area that I think is interesting is the ability to pay a dining check with tip without having to wait for your server to physically bring out a pen and paper.  And again, Yelp and OpenTable are thinking through similar ideas which will make it hard for PayPal to be top of mind when at a restaurant or searching for food.  It could make sense for PayPal to become the preferred payment option from a Yelp app, but then again the wallet wars are still anyone’s game to win or lose.


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Filed under Payments, Product Innovation, Product Marketing