Subway Teams Up With PayPal On Mobile Payments

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Ordering your food or beverages by smartphone and then paying for it via an app is quickly becoming the new normal. Starbucks already allows for this across thousands of its stores in the U.S. Meanwhile, Burger King and Firehouse Subs announced integrations with MasterCard’s MasterPass digital payment solution just this week, and Taco Bell’s own mobile ordering solution is powered by Heartland, the companies also this week stated. Now you can add one more to the mix: Subway and PayPal are working together to turn on PayPal’s OneTouch mobile checkout experience in an updated Subway app that work across the chain’s 27,000 U.S. locations by the end of the year.

Subway had actually quietly launched a mobile payment solution in its app last fall, but only began discussing the details more publicly this May as it needed time to train staff and work out the kinks. It still hasn’t made a huge, splashy public debut, however – though that will change later this year as Subway begins to advertise its mobile ordering and payments app for iOS and Android.

The app will allow Subway customers to build their sandwiches using their smartphones, pay ahead of time (or while in line), then pick up their bag and run when they arrive at the store.

The sandwich chain’s mobile apps were previously created by Paydiant, a company PayPal acquired this March for $280 million. A white-label digital wallet maker, Paydiant was best known for being the payments startup behind the mobile wallet from the merchant-owned network MCX, led by Walmart, and whose members included Target, CVS, Rite Aid, Best Buy and others. With MCX, the group of retailers had been developing its own alternative to Apple Pay with CurrentC. In addition, Paydiant had built a number of other large business clients like Harris Teeter, Capital One, and – yes – Subway.

Now that Paydiant is a PayPal company, it’s moving to integrate PayPal’s OneTouch mobile checkout into the Subway application as another checkout option, alongside the app’s support for Apple Pay and Android Pay. The benefit to using PayPal OneTouch is that it works across all apps where PayPal is installed. This means end users only have to sign in one time in a supported app and then can skip logging in to PayPal the next time they check out in that same app or any other one.

For Subway, the company believes that this sort of simplified approach to payments makes sense for its own customer base, which also embraces a “digital lifestyle.”

“The PayPal customer base is very complimentary to the customer base that would frequent Subway restaurants,” explains Ken Moy, Director of Global Payments and Emerging Commerce at Subway. “So bringing together the convenience of what PayPal will enable us to further do with our mobile app is very much in sync with what we’re trying to do – which is make it as simple as possible and as convenient for customers to buy sandwiches from us,” he says.

Moy wouldn’t speak to the traction the mobile payments solution within the current build of the Subway app has seen to date, noting that the company has only recently been making comments on a national level about the newer functionality. However, he did note that the app has already seen “pretty good organic growth.”

“We do see a significant increase of usage as well as significant use by repeat customers,” says Moy. Customers are using both the app and the online ordering function on Subway’s website. “We do anticipate this hockey stick will continue to happen as we put more resources to it, in terms of marketing and advertising,” he notes. Plus, Subway believes that the integration of the PayPal support will increase this usage even further, Moy says.

For PayPal, however, its work with Subway is just the beginning of what the company indicates will be a series of announcements about Paydiant-built apps turning on PayPal’s checkout.

“Subway will be the most prominent initial launch partner for all that,” notes Chris Gardner, co-founder of Paydiant. But while PayPal’s purchase of Paydiant is helping it get a foothold in a number of mobile apps, it will still have to compete with the other forms of payment, including Apple Pay and Android Pay, that the businesses themselves will want to support.

“At the end of the day, many of customers will provide the ability to pay through multiple ways…it’s not either/or – it’s making sure customers can pay they way they want to,” says Gardner.

Subway expects its PayPal-powered app to arrive before the end of the year.