McDonald’s, lovingly referred to as McDo here in France, just started testing a new mobile payments system in 30 outlets across France (specifically in Paris, Lyon, Nice, Toulouse and Reims) where customers can use McDo’s new mobile app or website to order and pay via Paypal. Although it looks like there’s some initial scepticism about the level of readiness of McDonald’s app, mobile payments appear to be a real strategic priority for McDonald’s as they’ve showcased the test at a recent conference as the foundation of “technology coming within the next 24 months or so.” Here’s a little visual from McDo’s website as to how it works [FR]:
As noted in the above diagram, one of the principal selling points for customers is that if they order through this new system, they can pick up their order at a dedicated line. This helps to improve the customer experience and also helps McDonald’s improve same store sales by reducing wait times.
One obvious first question is why they chose France for this first test? Well, although it may seem counterintuitive to some, France is an extremely important market for McDonald’s. In fact, it’s McDonald’s second(!) most profitable market and has a grown at a rate of 30 new restaurants per year over the last 5 years (there are currently 1200 outlets in France). So, I suppose getting the system right and working out the kinks in one of their most successful markets, should help improve their chances of successful roll-outs elsewhere.
For Paypal this deal with McDonald’s is a potential gold mine. Although they’re starting small, if this expands even to half of McDonald’s 30k+ outlets, that would be a massive opportunity for them. In addition, the mobile payments space is very fluid and increasingly competitive. Paypal who have had a solid hold on the online payments market for some time, is facing daunting challenges as new entrants, most notably Square, are eating into Paypal’s share. This deal was in essence a response to Square’s much publicized deal with Starbucks announced earlier this month. Paypal has also responded by signing up other large retailers in the US including Home Depot and Office Depot to accept payments. It looks like Paypal is doing a good job of fighting back…if the McDo deal succeeds, from first glance Paypal might have an advantage over Square here as McDonald’s 30k+ outlets bests Starbucks 11k (7k in the US). However, Square has proven to be a real disrupter in the mobile payments space and plans to expand outside the US (even with the challenge of differing banking systems around the world). The more likely scenario is that Paypal’s going to continue to be in perpetual reactionary mode as Square keep pushing towards their ultimate goal of “seamless, effortless” payments (fyi, check-out here Square’s plans for the Starbucks deal and their eventual expansion).