This Week In Payments: Feeding The Hunger For Innovation, Sometimes Literally

The payments and commerce ecosystem got busy getting busy this week as the first full week of 2020 kicked off the press releases began raining down from the sky from the year’s early bird innovators. The International Consumer Electronics Show in Las Vegas certainly helped given a boost to the rate of announcements.

But while the main stage in Sin City certainly threw off more than its share of headline-makers — the world stood in awe this week as Beyond Meat rolled out meatless sausage and Hooters rolled out meatless chicken wings — the highlight in payments and commerce came from all quarters. It was a good week for digital commerce double downs and expansions, particularly out of big players.  But it was also a week for spectacular retreats, or at least rumors of one forthcoming from Grubhub, which reports indicate is looking for a buyer. Reports that the company denied and upon doing so, saw its stock price sink nearly 6 percent in after-hours trading.

It was a portentous week, Paytronix CEO and Co-founder Andrew Robbins told Karen Webster for the first This Week in Payments chat of 2020, in terms of what it signals for the rest of the year for where payments and commerce are heading next.

McDonald’s: It’s About All About The Experience

This week McDonald’s announced that as part of its ongoing focus on digital initiatives and integrating new technologies it has created a digital customer engagement team.

“Digital is transforming global retail, and it will transform McDonald’s,” said CEO Chris Kempczinski. “At the same time, I’ve heard your feedback that we still have more work to do to fulfill our digital potential.”

The newly created team will be responsible for loyalty, delivery, digital ordering and personalization of orders and be led by new chief digital customer engagement officer Lucy Brady, the former senior vice president of corporate strategy and business development.

The move, Webster and Robbins noted, fits with many of the rapid strides McDonald’s has taken in the last few years in the digitization of its business that include the founding of  McD Tech Labs in 2019, the addition of digital self-service kiosks to stores, the inclusion of mobile order-ahead and digital rewards in its mobile apps and recent acquisition of Aprente and Dynamic Yield.

“I think the news suggests that McDonald’s knows that guests are increasingly interested in better overall experience and retailers that don’t provide them are scooped up by business models that do,” Robbins said, noting McDonald’s can see the massive effect that successful digitization had for competitors like Starbucks and Panera, and that the competitive stakes in the quick-service restaurant (QSR) field were changing.

As recently as a few years ago, he noted, McDonald’s marketing was quite different — it was focused on its food as a good value. The dollar menu was its most popular thing to promote. Look at those same advertisements today, he noted, and are focusing on mobile order ahead, self-service kiosks and the transformation of the experience of buying the food, rather than how cheap the food is.

And McDonald’s is doing that, he noted, because that is where the growth is. McDonald’s noted that in a few short years digital orders have gone from zero percent of its business to 4 percent. That might not sound massive, but when one is the size and scale of McDonald’s, that 4 percent amounts to $4 billion in sales.

“Do consumers really want or need twice as much food for a couple of bucks, or do they need more convenience in their lives. I think the numbers have voted, and that McDonald’s can grow those sales figures to 4 percent of their business, then 8 percent and even to 10 percent and beyond. And a lot of that I think is going to be incremental sales,” he said.

And, ultimately, healthier sales that will better build the bottom line. Because a few years ago, when it was leading with the dollar menu, the problem was everyone else was, too. Who would sell the most food for a dollar? That, Robbins said, is a death spiral for all involved. But competing on the digital experience, convenience and loyalty offers, one can build around it.

“That has the benefit of being a value proposition that is actually valuable to the company offering it.”

And while McDonald’s nabbed some attention, it wasn’t the most discussed expansion of digital service this week.  That honor went to Amazon and Exxon.

Pay With Voice At The Pump Gets A Jumpstart

Voice commerce got a big boost this week from CES with the joint announcement from Amazon, Exxon and Fiserv that soon Alexa users will be able to buy their gas with a simple voice command:

“Alexa pay for gas.”

The service will require either an Alexa-enabled car, an Alexa auto or another Alexa connected device.  And, of course, the customer, for now, has to be at one of the roughly 1,500 Exxon and Mobil gas stations that will be rolling out the tech in 2020.

“We’re excited to bring new technology and better experiences to the gas station,” said Eric Carmichael, the Americas fuels marketing manager at ExxonMobil. “We build and seek out technology that will wow our consumers, providing both ease of use and security.”

Voice was on stage a lot at CES outside the Alexa- extended universe, Google was on stage and all over the convention floor discussing a recent flood of new users and connected devices.

But Robbins and Webster noted that pay-at- the pump announcement stood out because it so well speaks to a consumer need. Cars are lousy environments to use a mobile phone in if one is driving, whereas voice is the natural fit.

Plus, Robbins noted, he not only wants to be able to use voice to order his gas while he’s on route to the station, but he also wants to use it while he is there.

“I want to be able to get out and yell at the gas pump, “also make me a coffee with two creams and two sugars and bring it to the pump,” he said. Now in one sense, he noted, he is mostly joking about wanting to scream at a gas pump, but he thinks wanting to be able to use and iterate more easily with voice-activated tech is becoming an increasingly common consumer desire.

How voice is going to evolve and whether voice is going to be an enabling technology as it mostly is today, or if it will grow into a more fully realized platform from which people could derive things like universal voice ID credentials is an interesting idea to consider, he noted.

But how that evolution shakes out is something of a work in progress. The advances out of Google and Amazon, not to mention the recent team of rivals partnership around building open source standards for smart home, indicates the possibility of evolving toward the platform model. That, he notes, brings the promise of a lot of consumer convenience going forward.

But, that interest in convenience is counterbalanced on the consumer side by concerns about data privacy and control over their private information.

“There is also a question as the more technology gets plugged in, there becomes a fairness issue around access to services for people who can’t afford the tech,” Robbins said, noting issues of this sort have played out in areas where restaurants have tried to switch to going cashless, only to run into local legislators who pass rules that require business take cash so they remain accessible to everyone.

“I think we are going to see advances, but also some competing forces in the market holding the technology back a little,” Robbins said.

And speaking of getting held back, there is Grubhub this week, and its difficulties getting ahead in a congested food delivery market.

Will Grubhub Find A Buyer?

Grubhub, since going public six years ago, has had a hard time holding its customer base and maintaining profitability. Reports this week indicate the situation has grown critical enough that the Chicago-based food delivery firm has hired financial advisers to explore options for the future, including potential sale or acquisition by another company. The company has denied that it was for sale, news that investors didn’t seem to like very much since the stop dropped about 6 percent after that announcement was released.

The brand is reportedly worried about attracting activist investors.

Food delivery has a market segment, Robbins told Webster, that is strong. The trouble for Grubhub, he noted, is that the rising tide has not lifted its boat so much as it has lifted DoorDash at both Grubhub’s and Uber Eats’ expense.

“What this probably says is that this market needs to be consolidated, and there are a lot of options on the table of what that could look like.”

One version sees Uber Eats buying up Grubhub — combined, they are larger than DoorDash and could put up a very fierce competition. The number two and three players in the market combining to topple number one, he noted, is a time-honored “business school move.”

Also, a possibility is a firm like Takeaway, which has a big food delivery presence in Europe and is about the same size as Grubhub. A merger or acquisition there, he notes, lets them get a big jump into the North American market, without having to build into an already crowded space.

The most interesting moves, Robbins and Webster agreed, are the possibilities for dark horse outside players like Amazon or Google to step in and throw their hats into the food delivery arena. Both parties have shown interest in the space: Google has added online ordering and Amazon stepped into food delivery before quickly stepping out of it — and a quick buy here for a good price could give them a lot of critical infrastructure that they need to compete.

“There may be something with an outsider, particularly one with larger ambitions in commerce trying to increase their presence in a customer’s life.”

And as an acquisition, with a market cap of roughly $5 billion, Grubhub is also now relatively cheap.

There are many possibilities for action here because Grubhub even after a few tough years makes for an attractive target for a lot of types of players. Which one steps forward, Robbins noted, will be one of the more interesting things to watch in 2020.

We agree.

But then, 2020 as its first full week demonstrated pretty convincingly, will have no shortage of interesting things to watch and wait for: How voice will evolve, what the QSR space will look like six months from now, whether the future of selling food will ever have anything to do with how the food tastes ever again, or be entirely decided by the most efficient delivery mechanism?

The questions are endless.

Which is why we’ll be here every Friday with the best and the brightest in payments talking through the answers, and what they mean for what’s next in payments and commerce.