Market Reports

Coffee shops scan new payment ideas

From robots to chatbots, coffee shops are eager to install new technology that speeds up the throughput of customers. While some innovations are already in place

and changing the buying experience, others are waiting in the wings and will either be transformative or judged too radical for the mainstream.

Starbucks is a leader in mobile payments, with a scan-and-pay service that now accounts for a sizeable chunk of its point-of-sale transactions. The coffee giant was early into mobile payments (it launched in 2009) with its no-frills service that effectively leveraged its existing infrastructure (the barcode scanners in stores). Users only need to download the Starbucks app to their smartphone. When making a payment, the app displays a barcode which the customer holds up to be scanned by staff.

The service’s debut was several years ahead of arguably more technically sophisticated services such as Apple Pay and Samsung Pay which use the touch-and-pay technology called Near Field Communication (NFC). Those services are used in the US and other countries around the world.

Other US food and beverage chains that serve coffee, including Dunkin’ Donuts and McDonalds, have also implemented point-of-sale technology that enable customers to pay using their mobile phones, although what makes Starbucks unique is its decision to build its own payment system from scratch.

Smaller chains, or single shops, do not generally invest in their own systems, but they have been exposed to a plethora of offerings in recent years. Many have invested in mobile point-of-sales systems. Arguably the most well-known of these is Square, the firm set up by Twitter CEO Jack Dorsey, which is present in the US, UK, Canada, Japan and Australia. Rivals include Payleven, SumUp and iZettle. All have broadly similar products: they offer café owners a dongle that can slot into the bottom of a standard iOS or

Android tablet to transform it into a payments terminal for accepting contactless payments via card or phone.

The point-of-sale firms have typically targeted small coffee shops by offering cost savings on their credit and debit card processing fees. In addition, they claim to offer a faster set up and improved data analytics over traditional payments terminals.

In 2015, Starbucks launched its Mobile Order and Pay service in the US, which enables customers to place an order and pay via the Starbucks app on their phone, before picking up the beverages in store. Effectively, this service moves the point of sale from the physical store to wherever the customer happens to be.

It achieved a rapid penetration of the marketplace in a relatively short time, particularly at the busiest times of day. However, earlier this year the company admitted demand from mobile ordering was leaving baristas in popular outlets stretched during peak periods, an unforeseen side effect from the service’s growing popularity. The company was forced to deploy more staff at peak times to deal with growth in demand, as well as temporarily turn off marketing of the service so not to draw even more users to it.

According to Starbucks’ most recent quarterly numbers, covering the three months to 1 October, Mobile Order and Pay now represents 10 per cent of total transactions in US company-operated stores. And the company is still intent on rolling out the service further, including internationally.

Speaking about mobile ordering in general (he has not tried the Starbucks system), the 2016 UK Brewer’s Cup champion and writer for the subscription-based Barista Hustle community, Jem Challender, says he is “not persuaded by the case for using such services for espresso-based drinks which deteriorate in minutes if not seconds”, a risk if a customer does not collect their drink promptly.

“A latte can pretty quickly turn into café au lait,” he explains. “In addition, I quite enjoy latte art, which would also degrade.”

Challender, who co-founded the highly-rated London coffee shop Prufrock, is more impressed by the Starbucks concept store where customers can walk in and place an order on their phones before the coffee is brought to them. “It’s a labour-saving approach that frees up staff to talk to customers about what they are drinking. I like that.”

Clearly, Starbucks sees the use of digital technology as key to future growth of its business, as well as improving efficiency. CEO Kevin Johnson described Mobile Order and Pay to investors on a call following its most recent quarterlies as “the first of many initiatives that will combine direct digital relationships with new value propositions in order to expand the total universe of customers with whom we engage and communicate.”

Beyond his wordy statement to the financial community, Johnson did not divulge further details, but the kind of thing we are likely to see more of is My Starbucks Barista, a conversational mobile application that lets consumers order by speaking to a chatbot-style interface on their phone, a sign of where the coffee industry could be heading next.

This virtual barista service is currently only a trial but mirrors a trend for AI in the wider tech industry established by the likes of Apple’s Siri, Samsung’s Bixby, Google Assistant and Amazon Alexa.

Cafe X

And the emergence of a virtual barista is not the only threat looming for the physical ones. Another example is newcomer Café X, which has an approach that is more Star Trek than Starbucks.

The San Francisco firm opened its first coffee shop in the city earlier this year. Customers place an order via app or tablet before their coffee is prepared by an automated system that includes a robot barista.

A video on Cafe X’s website shows the robot, essentially a white, industrial-looking robot arm called Gordon (named after one of the company’s engineers), at work in a booth in the corner of the city’s Metreon shopping centre, busily revolving between an espresso machine and a milk dispenser. Customers are greeted by a message on a screen: ‘Good Afternoon. One moment while we get your americano’. In fact, Gordon can make any coffee, but has yet to master latte art.

CEO and Co-Founder Henry Hu says the set-up is not just about speed of service but also consistency of end product. “The good thing about automated machines is that we can spend hours and hours programming a recipe into the machine with the roaster, then trust it to automatically do it perfectly every time.”

When quizzed about whether he sees Café X as an outlier, or a future model for the whole industry, Hu talks up job creation rather than focusing on the threat to existing roles: “We will see more automation in foodservice in the future. This is great because it creates a ton of new jobs that are of high productivity and therefore more fulfilling for employees and helps them earn more money,” he says.

“It’s well known that turnover in restaurant/foodservice is super high. It’s not a good thing for anyone. New, higher productivity jobs will help solve that problem,” he adds.
Interestingly, coffee-making champion Challender sees the attraction of a system that provides the kind of precision in coffee-making any human struggles to match. “If the focus is on consistency of recipe-making there is no doubt an automated system surpasses baristas.

“A super-automated system that is easy to clean, and looks good, will appear on the bar of a lot of speciality places,” he predicts.
In what could turn out to be an acute observation, Challender lays out a possible future of co-existence, among speciality shops, of the knowingly traditional that will see human baristas using the old techniques and machines, and those outlets embracing the most modern technology for a guaranteed end-product.

Marc-Alexander Christ, co-founder of mobile point-of-sale system SumUp agrees: “There is a big trend in coffee shops at the moment to go back to the handcrafted movement but I think there is a lot of efficiency to have from automated machines and there is really no reason for a person to stand there and make a coffee.”

Paywave

Instead, he foresees an evolution of the barista’s role: “If you look at customers in general, they do value human interaction and someone to recommend a coffee so I think the role of the barista will become much more the scene-setting face to the customer, the welcoming portion, while the real coffee production and serving can automate much more.”

However, the pace of new technology introduced to coffee shops and other retail outlets will likely be fitful, governed by available cash in the industry for upfront investment and customer acceptance. In other words, not all trials of technology will make it to commercial launch.

One executive at a US tech firm, who does not wish to be identified, explained about testing a futuristic sounding service in NYC whereby a customer walks into a store and is automatically identified. Such identification could be done by geofencing, typically GPS, RFID, low-energy Bluetooth radio technology or by biometrics, such as iris scanning.

The customer then has their identity confirmed by staff, who can match an image on their point-of-sale terminal with the person in front of them. The process enables customers to pick to up their regular coffee, which is recorded on the terminal, and leave without needing any further interaction (payment is taken automatically from a card they have added to the system).

The executive says staff were reluctant to adopt the service, without giving further details about what made them unhappy. Perhaps, it was another instance of an unexpected addition to the barista’s workload, if a spate of customers turned up simultaneously expecting to pick up their beverage and walk straight out again.

It’s also possible some consumers might be unnerved by such a lack of human contact, and maybe even how the system can store a significant amount of personal data about them, not just their choice of beverage and method of payment but also the time of day they regularly enter the shop.
“I think on the technology side, making it a nice experience is relatively easy, but educating customers and merchants is really the key to making this type of service successful and widely adopted,” argues SumUp’s Marc-Alexander Christ.

He talks about the reaction he got in a US coffee shop using a contactless card (relatively few payments are made this way in the States).

“I received a strange look because the transaction happened without putting a card in a terminal, and that’s a pretty basic experience. Now imagine you just walk in, grab a coffee and walk out again. It’s a change in consumer and merchant behaviour, and changes in human behaviour always take a long time to be accepted.”  GCR

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