The global market for on-demand food delivery services is projected to reach $259.7 billion by 2027, growing at a global CAGR of 29.4% over the period 2020-2027.
The global food delivery space has been tackling various ongoing challenges since its inception – even as it continues to expand, the commercial model and economics are still evolving. The Middle East online food delivery market is heating up as well in response to soaring customer demand.
On-demand delivery concepts and food disruptors have been emerging in the Middle East integrating online platforms with offline stores.
The overall on-demand food delivery market in the Middle East has doubled in revenue in 2020, with Saudi Arabia having the highest revenue growth rate. Global players, like Deliveroo, and homegrown players including Talabat and Mrsool, are all striving to stay relevant in an ultra-competitive market.
As the industry continues to develop, payments innovation and operational efficiency will become key factors for long-term success for the various players in the region.
In search of operational efficiency, innovative companies are starting to overhaul their existing payment infrastructure, replacing inflexible systems with modern card issuing platforms.
What are Modern card issuing platforms?
Modern card issuing platforms are end-to-end platforms that enable organizations to create, distribute, and manage physical and/or virtual cards using open APIs.
But how can this power the on-demand food delivery market?
Let’s dive right in.
The working principle of on-demand food delivery platforms is solely based on a network of several parties including the customer, the merchant, the aggregator, and the delivery partner. Essentially, all these parties need to be constantly incentivized and empowered to sustain operations on the same platform.
On-demand food delivery companies can partner with modern card issuing providers to give better experiences to their customers, streamline operations and drive profitability.
Modern card issuing enables on-demand delivery companies to overcome long-standing payment challenges by maximizing control over daily operations and driver-related payments.
Today, food delivery companies have a golden opportunity to unlock use cases that have never been served before.
With the help of open APIs, companies can issue their own cards to delivery couriers that can be used to process payments just like any other point-of-sale transaction. This way, delivery companies can scale with an ever-expanding restaurant selection without payment settlement becoming a bottleneck – enabling delivery drivers to rely on modern card payment technology to pick up and pay for food for hungry customers on tight schedules.
How Modern Card Issuance addresses common payment pain points in on-demand food delivery
Many food delivery orders require point-of-sale payments. This means that food pickup payments are settled either directly between the platform and merchants or drivers have to pay for the order using their own payment methods when picking it up at the store.
For settlement between the platform and restaurant, platforms have to build extensive financial operations teams to reconcile and process payments which means restaurants don’t get paid for days or weeks.
And if the driver has to pay out of his pocket then that is constrained by the cash that he carries on him which in turn depends on how quickly he gets reimbursed for those orders. What if the driver after accepting an order didn’t have enough cash to fulfill the order? Well, this might result in an unfulfilled order, a disappointed customer, and consequently, missing out on a sale. And a lost sale means losing a customer as well, whether their order was small or large.
Cards are essential to enable delivery drivers to always be in the money and fulfill orders when they don’t have cash in their pockets.
But how does modern card issuance differ from traditional card issuing?
Older legacy card issuing methods are too complex and require lengthy and costly processes – slowing the onboarding of new drivers. This, as a result, will prevent companies in this ecosystem from meeting the surge in demand for on-demand delivery services.
Mrsool’s order revenue in 2020 is more than five times that of 2019, rising from 59% in Q3 of 2019 to 77% in Q1 2021.
To meet the crush of orders, many on-demand delivery companies are scrambling and working 24/7 to hire thousands of delivery couriers and operations associates.
Modern card issuing is enabling on-demand delivery companies to thrive in a crowded market with fierce competition.
Using modern card issuing platforms and their open APIs, cards can make it into the hands of drivers in short time frames. The faster these cards are in the hands of new drivers, the faster they can begin fulfilling orders. Once drivers pass a background check, they are good to go.
On-demand delivery companies need modern card issuing to:
• Gain control over driver payments
Modern card issuing platforms not only make it possible for on-demand delivery companies to get physical and virtual cards in the hands of new drivers quickly, but they also add security layers. This additional security is even more important today given the rising volume of fraud.
In an on-demand delivery case, companies can issue cards for their couriers with predefined spending controls — for example, restaurant ID and the exact total amount of purchase — to avoid card misuse at other restaurants or fraudulent add-ons. Restricting when, where, and how these cards are used provides additional protection and ensures cards are used for their intended purpose.
• Generate new revenue streams
Business expenses can be turned into a revenue generator. By issuing cards through modern card issuing platforms, companies will be able to generate new revenue streams by earning transaction fees on every card payment made by delivery drivers.
• Obtain end-to-end insights
Through modern card issuance, delivery companies can gain end-to-end, real-time insights over every transaction to help them and their restaurants learn more about delivery preferences – to better serve end customers’ needs and wants.
Figure out how SimpliFi’s corporate spend card programs can help you streamline driver-related payments and power your on-demand food delivery business.