Faster Payments

The Tipping Point For Instant Digital Payouts To Restaurant Workers

The last few weeks have been hard times for the restaurant industry in the U.S. — big chains and mom-and-pop joints alike are closing their dining rooms, furloughing their staff in some cases and working overtime to find out-of-the-box ways to weather the incoming storm.

And, according to the projections from the National Restaurant Association, the forecast looks pretty grim. All in, the NRA estimates that the total costs to the industry will be roughly $225 billion, with as many as 5 million to 7 million potential jobs lost, or about a third of the entire sector’s employment.

It has been an incredibly difficult period for the entire restaurant industry, Kickfin Co-founder Brian Hassan noted in the inaugural edition of PYMNTS’ In An Instant conversation with Ingo Money CEO Drew Edwards and Karen Webster. And it’s one that has stretched players of all sizes to radically reconsider and restructure their businesses.

What Hassan sees in his hometown of San Francisco is that people are turning to either curbside takeout or delivery options — whether or not they have any digital infrastructure, like an order/delivery-integrated website or mobile app.

“And so they’re really pressed for time right now to determine how we can be efficient, and how we can offer our employees opportunities to work so they can stay gainfully employed in one of the most expensive U.S. cities to live in,” Hassan said.

It is a time when restaurants need digital integration in general and instant payments, particularly for their already burdened staffs, in particular. As Edwards noted, time is officially up for restaurants and a lot of other businesses when it comes to moving money. The need to do better is no longer optional — it’s do or die.

“It’s become acutely obvious to people that the analog, old-fashioned mechanisms of moving money don’t work in this once-in-a-lifetime environment where everybody’s stuck at home,” Hassan said. “So I think we’re never going to go back to the same levels of analog that we saw before. This is the big step-up arriving.”

And for restaurants, Hassan noted, the starting point is in distributing tips to those workers.

A Tale Of Two Tipping Processes (In Need Of An Update)

The great bifurcation in the restaurant industry today, Hassan noted, is between dine-ins with table service and quick-service restaurants (QSRs). The dine-ins, he noted, have the very traditional cash-locked process. The establishment has cash delivered daily (because their transactions are largely digital) and packages employees’ cash tips in envelopes at the end of the night. Given the concerns about contagion, cash is suddenly an undesirable means of payment for basic sanitary reasons. Still, employees are less able to pull away from the immediacy of cash tips.

On the other side of the coin, QSRs have long since been more invested in the world of pick-up, delivery, digital payments and digital tipping. But those restaurants, just like sit-down services, said Hassan, have the same impetus to make sure those funds are getting into their workers’ hands instantly, especially now in times of depressed business and diminished hours.

“We see that employers are afraid for their workers, and hear stories of their employees taking advantage of payday advances or loan companies, which are predatory,” he warned. “They are wising up to that, and saying they need to put funds in their employees’ accounts now more than ever. And that is the quickest possible clip when customers aren’t paying in cash.”

That’s because customers are not paying in cash and are not coming in nearly as often, but they are tipping more. Food is local and personal, Hassan pointed out — and people are acting accordingly and ordering more from their neighborhood places and other favorites in an attempt to help them weather this difficult time.

But, Hassan and Edwards have agreed, it will be a heavy lift in tough times — the solutions will critically involve payments, but will be bigger than payments alone.

The Bigger Digital Picture 

In an all-hands-on-deck situation, restaurants are doing everything they can to keep the lights on, the employees paid and orders served. That means waiters driving delivery routes and bartenders handling curbside drop-off, Hassan noted — and finding ways to manage all of this over the phone for small places with less than 10 locations that don’t have their own digital channels and are not integrated with any of the big four delivery platforms.

“They’re not just going to have to look at electronic payments as a way of building a more operationally efficient business,” Hassan said. “They’re going to have to look at a lot of other aspects and perhaps even look at delivery as a core service — not just now, but down the line.”

Because though the world will certainly return to a more normal place than it is right now — there will be dining out again, and Broadway shows, and movies and the like — it won’t be the same as before. The weaknesses of analog methods — for payment and for operations — have officially been exposed, and found lacking. And while that is a challenge to be dealt with in already challenging times, Edwards noted, ultimately he believes it will be one worth meeting.

“I’m still the optimist, so I’m hoping this has a positive impact on the acceleration to digital,” he said.

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PYMNTS STUDY: THE CROSS-BORDER MERCHANT FRICTION INDEX – JUNE 2020

The PYMNTS Cross-Border Merchant Friction Index analyzes the key friction points experienced by consumers browsing, shopping and paying for purchases on international eCommerce sites. PYMNTS examined the checkout processes of 266 B2B and B2C eCommerce sites across 12 industries and operating from locations across Europe and the United States to provide a comprehensive overview of their checkout offerings.

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