Are Self-Service Terminals The Way to go for Restaurants?

Self-service ordering and payment kiosks, initially deployed by McDonalds and Golden Village Cinemas, are now widely available among fast food franchises in Singapore.

In fact, they have mushroomed across the food & beverage (F&B) sector, especially among the chain establishments. A recent visit at a shopping mall (you can guess which one) shows this:

Advantages are obvious

Of course, the government grant played an important role for their fast adoption (Singapore government terms such as self-service technology or SST, used to address the chronic problem of low skill labour shortage in the country). Nonetheless, the impetus for the establishments can’t be more obvious.

Such terminals not only reduce manpower cost, but also increase (theoretically) serving capacity during peak hours and allow operators to re-deploy (some say retrench) existing manpower to improve overall efficiency. For customers, it (theoretically) improves ordering experiences as they can now make their own decisions with their own hands – no more miscommunications or voice confirmation of order.

Costs may not be sensible

That said, such machines carry substantial production, installment and maintenance costs, rendering them infeasible for smaller businesses with no economies of scale.

Most of the self-service kiosks have to be custom-made to suit the form factor, branding, menu and accepted payment methods etc. of each establishment. The initial high cost of customization may be spreaded over numerous counters for large F&B chains, but may not be feasible for single-store business, such as food stores in hawker centres and food courts.

Moreover, such self-service kiosks have to be maintained by technicians and upgraded by dedicated software development team. Touch screen, as other components, has limited lifespan and requires regular repair and replacement.

Therefore, the continuous maintenance cost can be significant and is likely to increase over time with the aging of equipments. While government is providing grants to support the adoption, they only cover part of the initial cost but not on the lifetime maintenance cost.

That said, it might not be a bad idea to use such kiosks as an interim solution – if some manufacturers manage to deliver off the shelf model where establishment owners just need to upload the menu and other content at the backend. Alas, this might not make economic sense for the kiosk manufacturers, yet.

Payment is a more Pressing Challenge

Challenges in payment diminish the expected savings in manpower cost. In food stores with self-service kiosks, patrons still have to walk over to the counter and make payment manually in two scenarios: self-serving kiosks only have ordering function but no payment function; patrons only use cash for payments. Therefore, cashiers cannot be removed completely from the counters, implying that the reduction in manpower is limited.

The payment modules of many such terminals are still largely offline. You might ask why. Well, cost is the main driver. The charges are much lower if the payment is made on a point-of-sale (POS) than on NFC modules.

NFC modules are still quite expensive (e.g. close to US$ 800 for some of the cheaper ones). Further, NFC is not supported on iPhone aside from the limited function of Apple Pay whose uptake is honestly underwhelming.

The best alternative

It is mobile payment (through smart phones), of course, simply because almost everyone in Singapore carries a smartphone now.

In China, Alipay and Wechat, which are empowered by QR codes, can completely replace POS and NFC payments. Recently, we published a few articles, covering how Alipay and Wechat have shaped the landscape of F&B and Retail industry in China.

However, for similar payment method to work in Singapore, the challenge is that no universal platform is currently available for people to launch a QR scanner easily.

What is needed in Singapore context

While most adoptions of self-service kiosks are happening in fast food outlets and restaurants, coffee shops, hawker centres and food courts lag behind this wave of transformation due to earlier mentioned challenges in upfront cost and maintenance. Singapore needs a smart solution that can achieve low cost effectiveness and convenience (as Alipay and Wechat in China), and can be applied widely to all F&B establishments.

QR code payments have been implemented in some hawker centres in Singapore this year. At the same time, Monetary Authority of Singapore (MAS) has set up a taskforce to develop a common QR code for Singapore by the end of 2017. This unified QR code development is an important step to achieve an efficient and cashless payment environment in Singapore.

As mobile payment spreads across the island, the average time spent by customers at counter will decrease significantly because of fast payment experience, which subsequently reduces the overall waiting time in food stores. Self-service kiosks are likely to be less effective in improving customer experience, or even obsolete. To add value in the future, such machines can incorporate QR code payment modules. Ultimately, the market of self-service kiosks depends on the speed of mobile payment penetration and the overall demand from F&B establishments.

Question – in China the adoption of WeChat Pay involves billions of dollars of marketing dollars (spent in different forms). Who is going to pay for the adoption cost in Singapore? Not the merchants for sure.

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Thanks for reading The Low Down, insight and inside knowledge from the team at Momentum Works. If you’d like to get in touch with us about any issues discussed in our blog, please drop us an email at [email protected] and let us know how we can help.