Starbucks and Square partner for improved payment experience at the counter

Square seals USD25 million as it teams up with Starbucks

Square is forging a partnership with Starbucks that will see the mobile payments firm power in-store credit and debit card payments for the coffee shop chain, with Starbucks also investing USD25 million in Square. The deal is Square’s first with a global brand, highlighting the company’s ambitions to evolve from a service handling transactions for small businesses to a major payment provider. Starbucks stores in the US will now accept the firm’s mobile wallet service, ‘Pay With Square’, which allows users to store payments details online and pay for goods using their mobile phones.

The deal is an important step for Square, as well as a boost for the wider mobile payment industry, as the firm attempts to boost uptake of its service among consumers and merchants. Partnering with Starbucks, which is already experimenting with a number of different mobile payment options, will give the firm valuable visibility in an increasingly crowded payments space and could pave the way for more retail partnerships. Although the funding is a welcome boost, it is the tie-in with a big household brand that is most significant here for Square. If the firm can clinch similar deals with other big retailers, such as Wal-Mart, the firm could push itself well ahead of other payment startups in the market.

CEO and founder Jack Dorsey indicates these are indeed Square’s ambitions in a letter to employees announcing the deal. “Square began with a really simple idea: everybody should be able to accept credit cards,” says Square founder and CEO, Jack Dorsey. “It should be easy and free to get set up and most importantly it should instantly adapt to any size of business, from the person chasing a dream to the largest organisation on the planet.”

This partnership also poses a direct challenge to Square’s main rival, PayPal, which recently announced deals with 15 major retail brands, including Toys ‘R’ Us, in the US. Earlier this year, PayPal launched a plug-in card reader aimed at smaller merchants that directly targets Square’s own flagship device. Square’s latest move, however, suggests that it is not cowed by its rival, with the firm expanding the battleground between the two companies to both smaller merchants and large retailers. PayPal’s increasing focus on mobile payments appears to have done little to stem Square’s growth so far, with the firm now processing USD6 billion in mobile transactions annually.

Starbucks is already among the most successful early adopters of mobile payments, claiming to have processed USD26 million in mobile transactions in the US just 12 months after launching the service. The firm also signed an agreement with Barclaycard and Visa Europe last year that meant consumers could pay for goods costing up to USD25 by scanning a contactless credit card over an in-store payment terminal. As well as this, Starbucks is adopting other payment technologies, including Facebook deals, highlighting the firm’s attempts to take an early lead in the space. The news bodes well for the manufacturers, carriers, payment companies and retailers who are investing millions into getting the mobile payments infrastructure off the ground.

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