Saving Dinner For Diners And Restaurants From EMV

“Uh-uh. No way. Cold cucumber mush for thirty-something bucks?”
–Phoebe Buffay, “Friends,” The One With Five Steaks And An Eggplant

Every year, hundreds of perfectly nice meals are ruined when it comes time to pay the bill. As it turns out, nothing alienates lifelong friends, convivial co-workers and potential romantic partners faster than the simple act of splitting up a check. Human beings were not meant to suddenly have all of their assumptions about math and payments – or, in particularly bad check splittings, economic equality and social justice thrown into chaos after eating a meal. That is all to say that many consumers have seen some version of that “Friends” episode play out at the end of a dinner at least once in a restaurant.

That “Friends” episode first aired in 1995 – and while the dining out experience has gotten significantly more tech enhanced, the intervening 20 years has done little to change the ultimate true-up moment at the end of a meal. Half of all consumers have indicated they would rather pay the check then split it. Googling “check splitting” will pull up over 53 million articles on the proper etiquette of splitting up a check when out with friends/family/co-workers/potential love interests.

Spoiler alert, they are not all consistent with each other.

Cover – and its mobile payments app – does not have any advice to offer, but does have a solution for the problem. They make it easy for patrons to split the check at a restaurant by allowing members to sign in to a table at a restaurant they partner with, inform the staff and approve a payment from their phone when it is over.

“We elevate the service. Restaurants care so much about service because it is the core of what they offer,” Cover co-founder Mark Egerman told MPD CEO Karen Webster in a recent podcast interview. “Whether it is plating the food or training the staff, they want to create these great experiences and Cover really gives them a tool they’ve never had before. And it’s a tool their existing customer base would use it if they had it as an option.”

It is not an option that Cover is alone in offering, Webster pointed out, as the Uberized dining experience is becoming a space with a lot of actors looking to get in. Leading reservation service Open Table has launched a payments function in some locations, and well-established name-branders like GrubHub, PayPal and Groupon also starting to expand into tableside pay.

“What makes you different from all the other options out there?” Webster wanted to know.

The answer, says Egerman, really comes down to focus.

“When we started Cover, we knew [we] weren’t the first people in the space and we decided we needed to be agnostic as to how people got to the restaurant,” he said, acknowledging that Cover was not out to create a restaurant dining search portal.

“Cover isn’t a payment service that’s a feature of a reservation platform – Cover’s whole business is about the payment itself,” Egerman said. And that, he believes, is what has helped Cover enable both a seamless payment experience that sets his company apart and also allowed them to become an important player when competing against some of the larger, and perhaps better known, players.

Cover’s main motivator is simple: They just want to be the best payments engine for restaurants.

“There are so many different ways consumer can choose restaurants,” Egerman noted. “As far as the front of the house, we are just not there at all. The largest player in the space is OpenTable, and people don’t understand how impossible it is to work with OpenTable; it’s not even a cloud based system. It’s 1990s technology, so when you call up to make a reservation, you directly connect to a Windows 98 machine in that restaurant. If the Internet is down, you can’t make a reservation.”

Instead, Egerman says, Cover’s strategy is to offer the most open and easily accessible payments package to enable mobile payments for the customers that his restaurants serve.

“Our strategy from Day 1 has been totally agnostic. We work with a lot of restaurants that don’t take reservations at all. We work with cash only restaurants that don’t even have a POS. We decided we would go with a system that required nothing from the restaurant, that would be out of the box and immediately set-up – and not to create any sort of bottleneck in getting our service up and running.”

Egerman confirmed that while their service does certainly have dedicated power customers who use it to make the majority of their dining decisions, on the whole they present a different value proposition to their restaurant partners.

“There are some [consumer] diehards that use our products and effectively only use our product because they chose the restaurants purely on the basis of who accepts Cover. And, we do have an incredibly curated list in the cities where we operate. But we don’t go to restaurants with a claim we drive a substantial amount of volume. Instead what we say is that we elevate the service.”

A service level, that from the restaurant’s perspective could be compromised with the coming EMV migration. That elevated service, Egerman noted, is a powerful retention tool for restaurants.

“We’ve actually become the largest player in the space by number of users, by volume,” he told Webster.

And, with the coming EMV liability shift, one that can help restaurants deal with the double edge of EMV compliance and the change that compliance would mean to restaurant service when it comes time to pay the check.

“I’ll be completely honest here, I work with restaurants and only a handful are aware that EMV is coming. I’ve worked in payments for a while and I am deeply skeptical that this industry will be fully ready by the time the Visa/MasterCard liability shift deadline,” Egerman told Webster in response to a question about how he sees EMV affecting Cover’s prospects and the dining experience. “I just don’t see it. I don’t see anyone actually making the investment, training their staff and changing their service order. I think people are just going to remain non-compliant. I think EMV is likely to be passed by mobile payments in some sectors, and I think restaurants is one of them.”

Egerman believes that this is particularly true for the segment of restaurants that it serves – fine dining, including Michelin star establishments. Mobile apps, such as that which Cover offers, can also help restaurants address another aspect of payments that Egerman says has bedeviled them over the years – interchange rates, which he says has increased markedly over the last several years.

“Restaurants face high interchange fees. They have no love for the credit card networks and being told ‘hey not only are your rates going to keep going up but now you have to adopt this funky, expensive table-side thing’ – well, I just see massive resistance,” Egerman noted.

And amidst that tension, Egerman believes, is Cover’s opportunity – their profits are derived from the lower processing fees that they are able to charge their restaurant partners.

“The volume we have already, plus the sophistication we bring to the table, means that we can just negotiate a much lower rate for processing the same card that people use at restaurants. We pass some of those savings along to our restaurant customers but the rest of this is just a pure rate arbitrage play. We have more information about our users to help prevent fraud and chargebacks,” Egerman noted.

And While Egerman doesn’t rule out a world where Cover is more than a payments company – perhaps one that does include some of the “front of house” operations Cover’s competitors offer – it’s also a future the company is in no hurry to go after.

“As our core, we are a payment company, and we’re going to let other people build that. For us to fundamentally drive value is to really make the payment experience easy. If we build the best in class solution, which I believe we have, we will let other people innovate elsewhere and we’re going to continue to drive value through what we do.”

And it is a vision that they are starting to get others to see as well. The firm has raised roughly $7 million from investors including Spark Capital, O’Reilly AlphaTech Ventures and Lerer Ventures. Cover was launched in 2012, and has a network of approximately 100 restaurants that are mostly in New York and San Francisco. Cover got into the market with a “start at the top” mentality that they believe is key to getting to scale. The company is focused on that scale, but it is also realistic about its place in the ecosystem today, and aligning its priorities.



February 2015 brought record amounts of snow to the Eastern seaboard and an impressive $9.2 billion of investment VC funding, private placements, etc.

The February investments this year represent a 55.2 percent increase over the same time period in 2014 – though much like February 2014, roughly three quarters of the total take was actually concentrated in only two +$1B deals, ( 76 percent in 2015, 74 percent in 2014)

Venture capital was the leading source of funding, with venture backed and strategic investments accounting for $8.8 billion of the total in February 2015. That is a 1,238 percent increase from $657M a year ago. Most of the investments – 82 percent – in retail payments were in the banking sector.

FinTech drove 96 percent of the total investments, which is a big switch from last February, when FinTech accounted for only 15 percent of investments.


The biggest transaction was the acquisition of OneMain Financial by Springleaf for $4B. The No. 2 spot was taken by the acquisition of the Royal Bank of Scotland’s U.S. and Canadian loan portfolios by The Mizuho Financial Group for $3B.

On the commercial payments side, the biggest move was a $110M VC funding for Xero. There were four other +$100M deals. Additionally, 19 of the total 92 deals did not disclose the amount of the funding.

On the B2B side of payments, most VC and strategic funds were allocated to B2B commerce, Invoicing and Other B2B with 83 percent of the total. Last year, February’s top performer was B2B payments, which dropped from $4.4B to $44M during this period.

VCs with the most participation in the FinTech and B2B payment spaces were SAIF Partners with three deals followed by August Capital, Data Collective, Salesforce Ventures, Accel Partners, Cue Ball, and Matrix Capital Management with involvement in two deals each.

The U.S. was by far the most active investment region in the second month of 2015, followed by Asia, especially China. The median investment amount was $5.4M, compared with $4.0M for the same period last year.