Meet The Man Who Wants To Change How You Pay At Restaurants

Cover is a new app that wants to change how you pay at restaurants.

At first glance, this might seem like a narrow market play. But there are plenty of niche payment apps springing up these days. And waiting to pay the bill at a restaurant, or wondering whether you'll be able to split a check on five cards, might just be enough of a hassle that Cover could actually catch on.

Here's how it works: You check in through the app once you arrive, select the table you're joining, and put your phone away.

That's it - Cover automatically adds a tip and splits the bill using your on-file credit card.

BI Intelligence recently sat down with Andrew Cove, the co-founder of Cover, over a meal at a midtown Manhattan restaurant (where we split the bill using what else, Cover) to talk about the app and Cove's thoughts on the increasingly competitive mobile payments landscape.

According to Cove, the app has hit 10,000 downloads since launching in October, and processes about $100,000 a month in transactions. Cover charges restaurants a fixed percentage on each transaction, but declined to disclose that rate except to say that it's very competitive with the credit card-processing fees restaurants normally pay. Cover currently has roughly 100 participating restaurants, all in New York City or San Francisco.

This interview has been edited for clarity and brevity.

BI Intelligence: I guess the obvious question is, why did you build a payment app that only works for restaurants?

Andrew Cove: We landed on restaurants because we like restaurants, but also because we had a vision of what the better experience is. Mark and I didn't say 'Let's start a mobile payments company and pick a vertical.' We came to restaurants because every time we met up, we were eating and drinking, and we were passionate about this space. So we started thinking about tackling the payment process and applying it to restaurants, which have the worst payment experience.

Mobile payments in the U.S. aren't actually better than credit. A credit card is a pretty effective mobile payment device. It goes with you everywhere you go, and it's pretty quick - it's not quick in restaurants but for every other transaction it is. Mobile payments as they've been approached so far - through Google or PayPal or the phone carriers - that experience is kind of terrible. It doesn't work in most places, and when it does work the staff often doesn't know what they're supposed to do with it. So when we floated this idea, one of the key takeaways for me was that in order to be better than a credit card it had to be basically no friction.

BII: Are you worried that restaurants are too tight a focus?

AC: Not at all. Part of what we wanted to do was be as focused as possible. The more focused we were, the more we could bake into the product that was relevant to the experience. So we only do full service sit down dining, because then you can get rid of a lot of the the branching patterns in the customer experience. We know how tips are going to work, we know how we're going to split the bill.

So we're not concerned at all that it's too tight a focus. Americans spend a ton of money on food - over $600 billion a year on food in general, and about $200 billion of that is on sit-down dining. That is an enormous space to play in, and it looks so different from all other retail transactions. We think we can compete in that space without going head to head with the major players.

BII: What's your strategy if PayPal starts pushing aggressively into the restaurant space?

AC: I think the question is how they get there. PayPal's approach thus far has been to partner with other companies that are working with small businesses. PayPal at its scale isn't going merchant-by-merchant on adoption and merchant training. So PayPal has to solve all of the problems that we have, and they can't do it bottom-up the way we can. I don't think it's out of the question that one of the larger companies could copy our exact experience, the question is what their go-to-market strategy looks like. We have a moat in that we work with the top of the market in New York, and they really like us. That carries into other cities because New York is the top restaurant market in the country, and it's where other people look for cues.

In some ways it will be a land-grab, but I think that the outcome is ultimately going to hinge on what it feels like as a customer trying to pay.

BII: What are your next steps in raising investments?

AC: We raised a good venture round last spring, and we still have legs on that. But we are going to grow the company, and that will involve more capital. We still have a ton of work to do in New York, and we want to be laying the groundwork for the next cities. We'll probably be at least twice as big in terms of headcount by the end of this year, and capital allows us to do that. Payments is an interesting business because the revenue numbers start small but the network effects kick in pretty quickly.

This Q&A was first published at full length by BI Intelligence, Business Insider's tech research service. Sign up to receive access to all our analysis, reporting, and downloadable charts on the payments, mobile, e-commerce, and digital media industries.