It’s no secret that the past couple of years have been turbulent for the hospitality sector, with inflation, rising operational costs, and ongoing staff shortages all taking their toll. Customer expectations are also changing, and the way we pay for food and drink has seen a particularly seismic shift in consumer behaviour – if you’d have told me 3 years ago that my Mum would be paying for dinner via a QR code I’d have laughed.
But if you told me 10 years ago that in 2022 I would hardly ever use cash, I’d have had the same reaction. So it’s clear that the world of payments will keep on evolving, and we need to be prepared to adapt. Just as we’ve all seen the benefit of not scrabbling around at the bottom of your bag for change, of tapping your phone rather than writing a cheque, or scanning a QR code rather than asking for the bill, it’s likely that further changes to our everyday payment habits lie in store.
But while everyone is talking about crypto and NFTs, there’s another (relatively) new kid on the block which I think will make more of an immediate impact on our industry. Paying for an NFT donut via Bitcoin may get you some press attention, but a payment method that could save venues thousands each year is far more exciting in my opinion.
You might not know much about Open Banking, but if you’ve made a payment on a charity donation website you may well have used it. Put simply, if a customer connects their bank directly to a digital payment service, they’ll cut out all sorts of middle men in the payment flow, in turn cutting out hefty and often hidden fees for the venue.
It also opens up possibilities to use banking data to improve the customer experience. Understandably, the words ‘open ‘,’ ‘banking’ and ‘data’ in the same sentence may concern some people, but the reality is far less scary – online services that calculate your credit score are a great example of using Open Banking data to provide useful information and give users control of their data. Now imagine the kind of personalised promotions we could serve our customers if we were able to conduct similar analysis.
This could build upon some of the learnings the hospitality sector is already taking from sectors such as grocery and retail. The last few years have seen a big shift towards using granular data about customer behaviour, and operators can now easily learn when their most popular times are, what customers order at these times, which dishes are ordered with which drinks, which type of customer tips the most, and even which type of advertising brings in the biggest spenders.
Even before the potential rise of Open Banking, this emergence of tech in hospitality, and recent changes to the way we pay have already helped the hospitality industry deal with rising costs and meet customer expectations – QR code payments come with much lower fees than most card terminals, and some venues have found that customers are 10x more likely to tip when paying digitally. That’s all before you throw in the time saved not spent flagging a waiter, waiting for the bill and looking for a card reader.
And despite concerns about taking away that personal touch, digital ordering and payments have actually helped staff be more efficient – instead of chasing the card reader they can turn tables faster and spend more time with the next set of guests.
However customers pay, payment fees remain shrouded in mystery. In fact, around 80% of the business owners I’ve spoken to are paying far more in fees than they realised. If you’ve ever seen the symbols ++ after the rate you’ve been quoted, you may be in the same boat. This refers to interchange and scheme fees, an additional 0.36% on top of the quoted number, as well as ad-hoc costs such a PCI acceptance fees which can quickly add up. This leads to misleading rates and a substantially higher monthly invoice than expected.
So hopefully the next technological advance in payments can not only demystify the murky world of excessive fees, but reduce costs even further and have a significant impact on our sector. Which is where Open Banking comes in. There’s huge potential to build upon the tech that customers are now used to, but reduce the cost to the venue by changing the payment process behind the scenes.
It may take some time for operators and customers to understand the benefits of Open Banking. But as attitudes change and adoption rates rise, it could revolutionise our industry. In fact, if the UK hospitality sector turned to Open Banking it could save hundreds of millions a year in fees. I’m open to that.
