Square to become payment processor for Starbucks

By on August 8, 2012, 5:00 PM

Starbucks, a company known for its forward-thinking nature and $1.95 cups of coffee, has made a deal with credit card processing outfit Square. Square will be providing the popular caffeine-based franchise with its payment processing services while Starbucks invests a cool $25 million into Square. The investment is little more than a rounding error for Starbucks' multi-billion dollar annual revenue, but also lands Starbucks' CEO Howard Schultz a seat on Square's board of directors. 

The deal may also send sizeable waves throughout the industry when it comes to mobile payment methods. Starbucks, the third largest restaurant franchise in the U.S., was an early adopter of mobile payments and currently employs its own barcode-based, mobile phone payment system. The beverage-maker's deal with Square could pique the interest of other franchises who may chose to follow suit, as the company touts lower than industry-standard processing rates. Additionally, NFC hasn't quite caught on yet, giving businesses using Square another advantage: the ability to receive wireless payments.

"As the largest retail mobile payment platform in the U.S., we’re excited and proud to accept payments with Square," said Howard Schultz, Starbucks chairman, president and ceo. "The evolving social and digital media platforms and highly innovative and relevant payment capabilities are causing seismic changes in consumer behavior and creating equally disruptive opportunities for business. Both Starbucks and Square take a similar approach when building products and running our businesses, and together we can bring the best possible payment experience to Starbucks customers."

Source: squareup.com, press release

NFC, or Near-Field Communication, has been a much heralded technology which enables customers to pay wirelessly via gadgets equipped with NFC chips. As with most technologies in their infancy, NFC has an uphill battle before it becomes a common standard. Adoption of NFC has been limited for a number of reasons, not the least of which are hardware, availability and interest.

Unsurprisingly, Square has been very critical of NFC. Unlike NFC though, Square's system will allow coffee drinkers to perform store check-ins and pay for items though its mobile app at any distance from the register -- possibly even allowing customers to order without ever waiting in line.

It seems as though Starbucks' continued reluctance to roll out NFC and its new courtship of Square could be a bad omen for the wireless payment technology. Starbucks may yet introduce an NFC option though, but NFC isn't explicly mentioned in the press release. There is also no mention of how this partnership will affect Starbucks' existing barcode payment system, but it is probably safe to assume they will co-exist for some time.




User Comments: 5

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Guest said:

"Square's system will allow coffee drinkers to perform store check-ins and pay for items though its mobile app at any distance from the register -- possibly even allowing customers to order without ever waiting in line."

Why would anyone want to use NFC for payments if this happens? Not me.

Guest said:

I can see a Starbuck's app coming... open the app, it tells you where the nearest branch is, and asks what you want to order, with payment using Paypal, Visa, Square, NFC, etc. As soon as you are in the shop, the payment is confirmed and the barista starts making your coffee. That's gonna save seconds eh ?

RajeGera RajeGera said:

Big problem with NFC is hardware dependency.Is NFC is compatible with custom based applications,obviously chipped with NFC harware or they have their own applications??Does anyone know about it??

Guest said:

NFC is rfid - radio freq ID - so it is two devices with appropriate/matching hardware and software that talk to each other. It is a general term used for two devices communicating using RF over a short distance. Specific examples in current use are the Octopus card in Hong Kong, the Oyster card in London, a security chip in a car's ignition key, wireless entry smartcards at work, etc. NFC for phones has its own standard and should work with software like Google Wallet. So you'll need to buy an nfc enabled phone and use software on that phone to exploit the nfc system. You decide if that's a good thing.

Guest said:

I think it is a great idea. Anything that speeds up technology integration into our daily routine is cool. I see this turning into checkout-line-less shopping at all stores. Bag your items as you shop; walk through a scanner which totals up your purchase; you swipe your card as you walk through the other side and out the store. No checkouts, no employees, no customer service.. oh, wait. That not a good idea

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