With McDonald’s Trial, PayPal Is Trying To Be A Lot More Like The Apple Store

With McDonald’s Trial, PayPal Is Trying To Be A Lot More Like The Apple Store

PayPal looks to expand its mobile payment market share and features with an app-based payment trial at McDonald’s locations in France.

Square’s announcement of its partnership with Starbucks and the launch of new mobile payment company by several key retail and service chains were signs that the mobile payment industry and digital wallet concept is big business. Late last week, however, there was more news on the mobile payments front that proves that the race is far from over – one could even say that it’s barely started.

In a move that could make Square’s deal with Starbucks seem small and limited, Reuters reports that PayPal may soon be expanding its brand of mobile payments to include on the biggest fast food chains on the planet – McDonald’s. PayPal is currently testing a payment system in 30 McDonald’s locations in France. The company demoed the technology earlier this year.
Unlike PayPal’s expansion into brick and mortar retail outlets, which began with a trial run in Home Depot stores, the McDonald’s trial is app-based. That means customers order and pay through their mobile devices and then pick up their order. The company’s payment system at Home Depot and other retailers allows users to pay simply by entering their mobile number and PIN on a keypad or using a special PayPal card.

The McDonald’s move significant for two reasons. One of which is pretty obvious. A deal that would bring PayPal to 30,000+ McDonald’s locations worldwide would easily dwarf Square’s deal with Starbucks.

The bigger point here, however, is that PayPal is using an app-based payment system – that could mean that the company has additional plans beyond its current retail setup. In fact, the system appears to function like an expansion of PayPal Local, which helps users find local businesses and make purchases from their phones. It is, in some ways, a fast food version of Apple’s own Apple Store app. Apple’s app lets you select and purchase items the companies retails stores without needing to pay at a cash register or even speak to an employee.

Another big point that’s easy to overlook is that the trail is not be run using NFC-based payments, which despite much hype have yet to catch on in most markets as a digital wallet technology. The McDonald’s trial appears to function in the same manner as mobile apps used by Moe’s and Chipotle – select a location, place your order and pay – then pick up your food. No need for NFC or to have an employee scan a bar code displayed on your iPhone.

Not to be shown up by Starbucks, Dunkin Donuts launched its own mobile app with purchase capabilities last week. Like the Starbucks app, the Dunkin’ app lets people load/reload and pay using a virtual gift card. Used for payment, the app displays a bar code that employees can scan. Apple’s Passbook feature in iOS 6 will offer the same capabilities for gift and loyalty card programs.

It’s worth noting that the company decided to go with the simpler process of scanning a bar code rather than using NFC. The obvious reason being that this gives Dunkin’ the ability to reach a much wider range customers.

Taken together, both of these stories show that players in the mobile payment industry are still jockeying for position and they’re still trying to perfect the mix of options needed to corner a significant chunk of the market. To recap, here is the patchwork of mobile payment systems available to consumers.

  • NFC-based wallet systems that fully replace credit/debit cards
  • Location-based purchases like those used by Tabbedout, PayPal Local, and Square
  • Chain-specific apps like the Dunkin’ and Starbucks apps as well as the McDonald’s test app
  • Device-less mobile payments like PayPal’s retail purchase options
  • Online purchase with in-store pickup – an option of several chain-specific apps, including the Apple Store app and apps for various restaurant chains

With the field of payment mechanisms this broad, it will be some time before the market reaches any kind of consensus on one or two major mobile payment systems. That’s good news for Apple, which has only dabbled in the nascent industry, but is expected to unveil a mobile payment system – most likely based on Passbook – at some point.

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  • Ben Fold

    I have a terribly nasty feeling about this partnership. One of the – if not THE- world’s largest fast “junk food” chain partnering with a “questionable” payment company. Don’t get me wrong. I am a proponent of progress and change and I support mobile payments. In fact, I am using a mobile POS from mPowa (www.mpowa.com) which I am very satisfied of. But I don’t feel good about this partnership.

About the author

Ryan FaasRyan Faas is a technology journalist and consultant living in upstate New York who has written extensively about Apple, business and enterprise IT, and the mobile industry. In addition to writing for Cult of Mac, he is a contributor to Computerworld, InformIT, and Peachpit Press. In a previous existence he was a healthcare IT director as well as a systems and network administrator. Follow Ryan on Twitter and Google +

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