Zomato gets out of cashless payments, at least for now

The company has debuted it earlier this year but found customer acquisition cost to be too high

Restaurant discovery service Zomato is undergoing some big changes, as it looks to streamline operations and put its resources behind its most well-performing products.

That means not only laying off workers, jettisoning its cashless payments feature that, and instead going full throttle on its newly implemented online ordering platform, it was announced over the weekend.

"While our users loved the seamless experience Cashless provided at their favourite restaurants, we believe the product could be far better – for merchants and users alike – while also being commercially viable," Deepinder Goyal, Founder & CEO of Zomato, wrote in a blog post.

Among the reasons for the feature not working as it should have was that "cashless wasn’t a part of the natural user flow for a typical Zomato user," and getting them to think different " was the most difficult part."

In addition, too many user were early adopters, the cost of educating restaurant staff on Cashless was too high, and took too much continuous maintenance.

"We all know that Cashless was a great user experience, and everyone who used it was delighted with the product and the convenience of not waiting around for the bill. But it wasn’t financially viable for us to keep the business running, as the operational costs of running it exceeded the commissions the product was generating for us," Goyal said. "Over time, no matter what we could do, the unit economics were just not going to work."

Zomato launched cashless payments in Dubai in February of this year. It allowed diners to settle their bill, at participating restaurants, using the Zomato app on their smartphone rather than paying with cash or physically swiping their cards at the restaurants. Every time a consumer paid via Zomato, the merchant paid  Zomato a percentage cut on the overall transaction amount.

The company charged restaurants commissions, which ranged from 7.5% to 15%, based upon the rating of the eatery.

So it this the end of Cashless for Zomato? Not by a long shot. It plans to bring it back to Dubai, and to other markets, when it has "the ecosystem in place to counter the above challenges." In order for it to work, said Goyal, it will need greater market penetration, getting it into "as many restaurants as possible."

Once that happens, users will become more used to the feature, and Zomato won't have to install any additional hardware at the restaurant.

"Having our table reservation and/or POS systems on the restaurant premises will enable a truly Cashless experience for our users, as well as restaurants," Goyal said.

So, for now, Cashless is gone, and instead Zomato seems to be putting its resources behind the other product it launched this year: online ordering.

Zomato does not handle the actual delivery of food but, instead, acts as a facilitators between the consumer and the restaurant. The restaurant will also have to manually accept each order from a user before it is processed as compared to passing orders from users to restaurants as other services do

To make money, Zomato charges  restaurants a commission, which will be based on consumer based delivery ratings.

"For us, online ordering is a key business focus and the lower commission rate is not a reflection of how we are prioritizing the business. In fact, our approach to the commission structure is unique where we are placing Zomato consumers first and giving incentives to our partner restaurants to service them better," Goyal told me earlier this year.

He reiterated his commitment to the feature in a blog post put up two days ago.

"Our users hold tremendous potential for transaction-based businesses. Getting into transactions was always the natural next step for our business. Online ordering is a natural and logical alternative for our users who, up until now, used to call restaurants to place their orders for delivery," he wrote. "Table reservations fit into Zomato as easily as online ordering did. The time has come for us to focus deeply on transactions in countries where it matters."

Holding off on cashless payments is not the only move that Zomato has recently made to streamline operations. Late last week, the company laid off 300 workers, or 10 percent of its workforce, mostly in the United States.

It also recently shut down Urbanspoon, the Seattle-based restaurant information and recommendation service, it bought in January.

Founded in 2008, Zomato has raised over $163 million to date, most recently a $50 million round from Info Edge, Sequoia Capital and Vy Capital in April, which valued the company at $1 billion.

(Image source: zomato.com)