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Starbucks: A million pay by cell-phone each week!

October 3, 2012

Starbucks Leads the Way in Mobile Payments
By Oregon Small Business Association

Ordering a double-shot latte is easier and faster these days using Starbucks’ mobile payment program. Even before its recent $25 million investment in Square, the San Francisco mobile payments startup, Starbucks had been processing a million mobile-phone transactions per week.

The Seattle-based coffee chain released its first mobile app in September 2009 which helped customers find stores, learn about coffee, and get nutrition information. In January 2011 the chain released a more powerful Starbucks Card mobile app, which also let consumers pay at the register by waving a bar code on their phone’s screen in front of a scanner. Customers have been able to load Starbucks’ digital prepaid card with an existing credit card.

Starting this fall, coffee lovers will be able to use smartphones to pay via an account linked directly to their credit or debit cards using Square’s Pay with Square app. Eventually, app users may be able to send friends invitations, complete with a map, to meet at a particular coffee shop or order and pay for their favorite drinks while en route to a store.

Launched by Twitter founder Jack Dorsey, Square represents something of a revolution in the realm of real-world payment systems for small businesses and solo entrepreneurs. The card readers, available at numerous stores including Wal-mart, Target, Fred Meyer and Apple, allow anyone to accept payments via iPhone, iPad, or Android devices by simply adding the company’s tiny plastic swipe module, which plugs into the headphone jack of your device, and firing up the Square app.

Square v 1.1 taps into “geo-fencing,” a virtual boundary for location-tracking devices. When enabled, Square will open a virtual tab as soon as your iPhone is within a Square participant’s “fence,” speeding up the purchase process. If you’re a regular, you can set up Square to automatically open a tab when you’re within range of a store, letting you buy without ever touching your phone or wallet. The update also adds to the directory of merchants, backs up your cards on a remote server, lets you delete credit cards, and fixes a few other bugs.

The app enhances customer service, moving lines 10 percent to 20 percent faster during peak hours which, in turn helps sellers increase revenues. Mobile payments now account for about 2 percent of Starbucks’ sales. That’s $266 million if the company meets analysts’ $13.3 billion fiscal 2012 sales projections.
On Aug. 15 more than a dozen retailers, including Target, Best Buy, and Wal-Mart Stores, teamed up to create their own mobile payment app which can cut transaction fees roughly in half. The cost savings can make a big difference in retail, where operating margins can be in the single digits. The merchants also want to increase sales by sending offers and product news directly to users’ phones, without intermediaries such as Google or PayPal.

  
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