Parlez-Vous PayPal?

CEO, Market Platform Dynamics
7:16 PM EDT August 20th, 2012

The news that Mickey D’s now accepts PayPal in 30 locations in France got the Internet buzzing yesterday. Most of the stories just reported the Reuters story from Friday. But, if you want to know the whole scoop and nothing but the scoop on what PayPal is really doing, read on!

First of all, this 30-store trial has been active since March! Hello??? How did we all miss that??? According to PayPal, they didn’t intend for it to be stealthy; they just don’t like to blab about all of the mobile payments stuff they are doing. They’ve made it clear that 2012 is the year of test and learn, and they are apparently testing and learning their mobile payments way across at least three different mobile payments schemes all over the world.

Downloading the McDonalds PayPal app lets consumers do a whole lot more than pay for le Big Mac – they can order any ol’ little French-inspired McDonald’s menu item they want from the app, pay for it using PayPal via the app, and then pick up the order in store. Voila – the online/offline experience in action in fast food! For those of you who parle Francais, here is the online link that tells you all about it.

According to a PayPal spokesperson, their McDonald’s mobile payments innovation is less about payment and more about customer convenience. Customers decide what they want to order, when they want to order, and they pay for it online using their PayPal accounts. When they get to the store, they go to a well-marked special line for pick up – not the line where everyone else is ordering food. They show a QR code that acts as a proof of purchase to the cashier, who then scans it and matches that order to the foods in bags ready to be picked up. This is all integrated into the McDonald’s POS. A few minutes later, the customer is out the door or at the table chowing down.

It’s pretty clever. Anyone who has ever frequented les arcs d’or (or any other fast food place) knows that the biggest time suck isn’t paying for the food; it’s waiting for the food. And, that time suck doesn’t just make customers mad; it makes store management sad too. The longer it takes to serve customers, the fewer customers that can be served. I am sure that all of you remember the promise of contactless cards back in the day – tap and go will speed up the line and merchants can get more sales! Except that contactless was engineered to speed up the wrong line and consumers didn’t really get the so-called “time savings” since they had to wait for the food anyway. What PayPal is trialing eliminates the friction from paying and the friction where it has the greatest potential to add incremental revenue to merchants – getting more customers in the store to pick up food that they order somewhere else.

This mobile payment method is also similar to something that PayPal did at the Mobile World Congress in Barcelona – a great city but a convention facility that is ill-equipped to handle 70k people for lunch all at about the same time. In order to ease the pain of standing in line for 50 minutes to get food, PayPal operated a similar set up at a paella stand. I’m told that they didn’t broadly advertise what they were doing, but dropped a bunch of flyers off at trade show booths inviting people to try it (for a little discount). Apparently, the best advertising for this app was the people in the 50-minute line seeing the people in the 10-minute line waiting to pick up their food! I am told that this sort of “advertising” is what is stimulating adoption in France at McDonald’s, too.

So, why McDonalds and why France you may be asking? Well, McDonalds came a knockin’ and PayPal said sure is what I am told, but here are a few other things I have since learned about France and PayPal and McDonalds that you might find interesting.

First off, did you know that France is McDonald’s second most profitable market in the world? Oui, oui, ma cherie! It may be hard to believe but it’s true. I found that factoid amazing, particularly since the French, I thought, much preferred steak frites and red wine over cheeseburgers, fries and vanilla shakes. But it turns out that most, if not all, of the McDonald’s in France are franchisee-owned, and they know their customers. As a result, they have been quite clever and deliberate about adapting local food preferences to McDonald’s menus. Customers in les arcs d’or can get le Big Mac on a whole-wheat bun with coarse-grained mustard and even chevre cheese! Vive la France!

Second, the French love PayPal. I came across this from other client work that I am doing on payment preferences globally. When it comes to payments, the French are very practical minded. Their main concern is that it be simple, secure, and FREE. Sure, you say, but isn’t this one of the few countries to keep the paper checque alive? Yes, but the French use cheques because they are FREE and work more or less like cash (they provide immediate funds to the merchant which is why they like to accept them. Not to mention passing a bad check is a criminal offense – which is apparently enforced!).  It also turns out that the French, especially the older ones, don’t really trust digital forms of payment. But they do trust PayPal when transacting online. So, the combo platter of simple (it’s just like shopping online), secure (it’s PayPal) and FREE (it’s free to consumers) was enough to get consumers and merchants on board for this trial.

The most interesting thing about this mobile payments experiment is that it offers an example of how something other than a value proposition tied to the payment transaction is igniting mobile payments. We’ve said for as long as mobile payments have been a topic of conversation that a compelling value proposition was essential for ignition – and that the value proposition had to go well beyond “its neat technology so why not try it.” I think that the failed experiment of contactless cards has gotten everyone to recognize the importance of going well beyond “it’s easier and faster” since most consumers don’t think what they have today with their mag stripe card is broken. So, what we now have is a boatload of offers, rewards, and incentives positioned as the silver bullet that will make mobile payments all fine and dandy with consumers and merchants. But, that isn’t what got Starbucks to 4 million mobile payments consumers in less than 18 months’ time and doesn’t appear to be what is driving PayPal customers in France to queue – or not, as the case may be – to use their mobile phones to pay for McDonalds cuisine. Delivering real sources of value to consumers and merchants is what will drive adoption and stickiness. It’s now time get serious about what that means and then execute on it.

What do you think?

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