Instant Payments Drive Profits for the Small Restaurants That Use Them

Forty percent of the independent mom-and-pop restaurants in the U.S. that generate $10 million or less annually now use instant payment rails as their primary method to send funds.

And these restaurateurs are pleased with the results, according to PYMNTS Intelligence data. Seventy percent say they appreciate how easy it is to use instant payments, and 68% say they value how quickly items are processed.

These are just a few of the findings included in “Small Business Real-Time Payments Barometer: Restaurants Edition,” a report created in collaboration with The Clearing House. The report — which is based on surveys with 614 small and medium-sized businesses (SMBs) in the restaurant sector that generate $10 million or less annually — also found that more than three-fourths of restaurant SMBs using instant payments credit the technology with driving healthier balance sheets.

graphic, restaurant profit margins

Given the overall positive feedback, we weren’t surprised to learn that 79% of restaurant SMBs using instant payments say they are very or extremely pleased with using instant payment technology.

This high degree of satisfaction is reflected in the fact that, overall, the use of instant payments among restaurant SMBs sending funds now exceeds all other payment options. In the last year, 74% of the restaurant SMBs surveyed sent instant payments. In comparison, 48% made payments using credit cards, while 44% sent ACH transfers and 37% relied on cash.

(It should be noted that restaurant owners have a variety of instant payment options to choose from. Last year, 41% used push to debit cards, while 40% selected instant PayPal. Venmo was used 27% of the time, while 20% of restaurant SMBs sent payments via instant bank account-to-account payments.)

For those restaurateurs who are still on the fence about whether or not to use instant payments, additional exclusive PYMNTS Intelligence data (that was not included in the final report) may help with the final verdict.

As the figure shows, when we compared restaurant SMB profit margins to their preferred payment methods, we found that those sending payments using PayPal and instant account-to-account rails had higher profit margins.

Specifically, PayPal users had the highest proportion of net profit margins (30.9%) that exceeded 50% — which our analysis calls “high profit margins” — while those using instant account-to-account payments followed closely behind, with 29% achieving high profit margins. Meanwhile, those that made their payments using ACH transfers and checks were most likely to show the lowest net profit margins. Nearly one-third of restaurant SMBs sending checks had profit margins of less than 10%.

It’s important to note the limits of this data — these findings do not necessarily mean there is causation between instant payments and higher profit margins, as many factors can be at play. However, when this information is taken into consideration alongside reports of healthier balance sheets and high levels of satisfaction, the correlation does seem to support the logic that instant payments contribute to more efficient restaurant SMBs.