In a move that may encourage others to adopt mobile payment options, Starbucks is going to use and invest in Square, which will help generate money for Square and Square will provide the backend for Starbucks payments. Throw in some marketing and cross-promotion and things get interesting:
The partnership terms include:
- Customers will be able to use Pay with Square, Square’s payer application, from participating company operated U.S. Starbucks stores later this fall, and find nearby Starbucks locations within Square Directory;
- Square will process Starbucks U.S. credit and debit card transactions, which will significantly expand Square’s scale and accelerate the benefits to businesses on the Square platform, especially small businesses, while reducing Starbucks payment processing costs;
- Using Square Directory, Starbucks customers will be able to discover local Square businesses — from specialty retailers to crafts businesses — from within a variety of Starbucks digital platforms, including the Starbucks Digital Network and eventually the Starbucks mobile payment application;
- Starbucks will invest $25 million in Square as part of the company’s Series D financing round;
- Starbucks chairman, president and ceo Howard Schultz will join Square’s Board of Directors.
By accepting Pay with Square, Starbucks is giving millions of customers another way to enjoy a quick and seamless payment experience at approximately 7,000 Starbucks stores. The partnership will also accelerate the ability of small businesses to grow with Square’s innovative technology and a stronger and more widely available Square network.
Square CEO Jack Dorsey shared a letter about the motivations, which seem mutually-beneficial. Then again, Schwarzbucks has been taking Square payments for awhile (or just money friends owe me).
Update: It seems initially that the system will work much like the current mobile payments at Starbucks (scanning barcode, non-iPad registers, no tab, no GPS. Also, the current loyalty program would be separate from anything offered with Square.