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Starbucks switches to Square for payments in the US

Starbucks Coffee Company has reached a partnership with mobile payments start-up Square to enable mobile payments at 7,000 of its stores across the US.

Starting this autumn, Square will process all credit and debit card transactions at Starbucks stores in the US. Eventually, customers will be able to order their drink and charge it to their credit card simply by saying their name.

As part of the deal, Starbucks is investing $25m in Square as part of its latest Series D funding round, which values the company at $3.25bn, according to the New York Times. Starbucks chief executive Howard D. Schultz will join Square’s board.

“My hope is that by creating a national footprint for Square technology in all Starbucks stores in the US, that it will be a catalyst for Square to get access to tens of thousands of other small businesses and democratise payments,” says Schultz.

Starbucks launched its own mobile payment app last year. According to the company, it processes more than one million mobile payments per week. This new deal will allow customers to continue using it, but they will also be able to use Square’s smartphone app ‘Pay With Square’.

In the first instance, Starbucks customers will have to show a bar code on their phone. With Square’s GPS technology, the customer’s phone will automatically notify a Starbucks store that a customer has entered and the customer’s name and photo will appear in the cashier’s screen. When a customer gives the merchant their name, the photo will be matched and the payment complete.

Square initially launched as a means for enabling payments to individuals and small businesses with its Square card reader. This deal with Starbucks marks Square’s global ambitions to take on the offline payments industry.   

“Starbucks is one of the largest organisations in the world, taking technology like Square – simple, fast and focused on customer experience – and bringing it to a massive scale,” says Square co-founder and chief executive Jack Dorsey.

Mobile payments are currently being tested by numerous companies worldwide, including Mastercard and Deutsche Telekom in the UK, PayPal and Google, among others.

According to a Gartner estimate, global mobile payment transactions will exceed $171.5bn this year, up 62% from 2011.

See also: Mobile wallets: the missing part of the jigsaw?

Jenni Baker, London