Restaurants could be first to crack the mobile-payments code

TechCrunch was among the first to report that the New York-based startup Cover has raised $5.5 million in a Series A round to build its restaurant-focused mobile payments business. Cover, which is available for Android and iOS, enables users to check in at restaurants to alert their servers, pay once the meal is finished and even split payments based on the number of diners at the table. Cover has inked several dozen restaurant partners in Manhattan and Brooklyn and 25 others in San Francisco.

Mobile payments at the point of sale have failed to catch on in North America for several reasons: Multiple competing systems and technologies have confused consumers and forestalled investments from retailers; mobile payments are more complicated and cumbersome than credit cards or cash; and existing systems have yet to provide compelling incentives for consumers and businesses to adopt them. Those hurdles are gradually being overcome, but I still don’t see mass-market adoption of mobile payments occurring for at least the next 12 to 18 months.

But restaurants could be the first vertical market to see mobile payments take off. Paying by phone can slow check-out times at most retailers, but it can actually save time at restaurants — where credit card transactions typically involve multiple interactions — so both parties are rewarded. (That might help explain why average receipts are higher when people pay with Cover.) And unlike systems based on new technologies like NFC, systems like Cover and OpenTable’s app can be integrated into existing payments systems relatively easily and cheaply. The market of restaurant-focused mobile payments still needs to consolidate before it can ignite, but restaurants could pry open the door that mobile payments providers have thus far been unable to open in any substantial way.