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Can Mobile Ordering Apps Handle Payments?

device-mobile-phone-iconAs mobile app operators try to make lunch easier for workers by enabling them to reserve seats and place lunch orders before arriving at restaurants, questions are being raised about how efficiently those fledgling apps handle payments.

A Business Insider story described the promise and hassle of using one such app, Allset, which has an option to make reservations and orders via a Facebook Messenger chatbot. (The story also briefly mentioned a similar experience with Seamless.) She tested the service during a workday in Manhattan and, according to the article, had little problem finding nearby places to eat. But when it came to placing orders for her and her coworkers, she found herself stuck and had to start over when entering her debit card information.

“But it still didn’t go through,” wrote Cadence Bambenek in the July 29 story. “When I type ‘help,’ a customer service representative immediately enters the Messenger app for support. She suggests that I don’t have enough money on my card, but I just checked. There was definitely enough money in my account. She then advises me to call my bank.”

The problem? According to Bambenek, her bank said “the method the company was using to verify my debit card, rapidly firing and retrieving small increments of money before making the actual charge to my card, was tripping fraud alerts and freezing my account. Additionally, my banker noted that my card was limited to 12 transactions a day, and that the app was sending so many requests it was pushing it over that limit, also triggering fraud.”

So how common is that situation, and what does it mean for the further spread of mobile ordering apps?

Neither Allest nor Grub Hub-owned Seamless, both of which were mentioned in the story, responded to requests for comment. But payment analysts weighed in, and the picture isn’t all that grim.

For one, the experience reported in Business Insider seems to be relatively unusual. “I would assume they are outliers in that most pay applications are more basic in that they conduct one transaction for the full amount,” says Tim Sloane of Mercator Advisory Group.

Part of the problem could stem from how app operators view payments, says Thad Peterson of Aite Group. “I don’t think that non-payments apps are necessarily handling payments poorly,” he says. “It seems to me that it is more likely that they don’t think of payments as an integrated part of their product offering and it can be seen as a ‘bolt-on’ function instead of core.”

Most mobile ordering apps, tied to tight budgets governed by their venture capitalists, tend to “outsource the payment processing and focus on the user experience,” says Michael Moeser, director of payments for Javelin Strategy & Research. In Allset’s case, its processor is Stripe, he says. Stripe did not immediately respond for a request for confirmation. “Another third party payments processor that is huge in the mobile app space is Braintree.”

He would not comment specifically on the situation described in that story, but Moeser says “it is rare for a mobile app to want to invest in payment processing infrastructure as there are better alternatives available and it allows them to focus on what makes them different, such as being able to book a table and pay for a meal in advance.”

No matter the scope of the problem, improvements are virtually certain to emerge with mobile ordering apps. “I think it’s safe to say that the practice is emerging and people are still experimenting with different use cases and applications,” Peterson says.

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