December 23, 2014
Around 7000 Starbucks locations used to offer mobile payments via Square Wallet. The partnership between Starbucks and Square, which began back in 2012, has come to an end. As part of the partnership, Square provided support to Starbucks through its mobile payments system. Starbucks was one of the key launch partners for Square’s Wallet app.
There was a time when there was a close collaboration between the two companies. Although Starbucks already had its very own app, it went ahead and partnered with Square. Starbucks had even invested $25 million in the mobile payments startup.
Previously, upon entering the Starbucks outlet, the customer had two options for making a mobile payment: the Square Wallet app or the Starbucks dedicated app. The Starbucks app supported the rewards program which Square Wallet app didn’t. Square discontinued its Wallet app earlier this year but continued support for existing customers including for those using Square Wallet for payments at Starbucks. Now, Square has completely removed the support for Wallet app and has brought Square Order in replacement. Meanwhile, Starbucks has also piloted a preorder feature for its dedicated app. Starbucks might or might not adopt Square Order which is now competing against Starbucks’ preorder feature.
Square is retaining some of the features of Wallet app into Square Order. A key feature is the ability to perform in-store check-ins and make payments. This feature is called Tabs. Square has already notified its Wallet users about the replacement with Square Order.
The end of this partnership might not be a big loss for Starbucks. Starbucks already has its own dedicated app which works in a similar fashion to Square’s Wallet app. Moreover, Starbucks is incorporating a new feature in its app which would allow users to order before they arrive at the outlet. The termination of this partnership is related to mobile payments services. Square would still be processing transactions made using credit or debit cards.
Starbucks has been highly focused on developing its own mobile payment system considers it a key business activity. Starbucks has the capability to keep the mobile payments service in-house and the deal with Square would have ended eventually anyways. Also, the Square Wallet app didn’t support Starbucks’ loyalty program and didn’t enable users to earn points.
The end of this mobile payments partnership is an indicator of a new trend where big brands continue to develop in-house capabilities rather than work with big payments brands. For Square, this is indeed a loss because it would lose a marquee customer for its mobile experience and face the loss of a big pie of its mobile payments processing volume. Starbuck’s mobile payments has seen accelerated growth with the volume leaping to $517 Mn from $302 Mn last year.
Finally, there is also some unconfirmed speculation whether this might be in preparation for another partnership that is getting ready to be announced between Starbucks and another ambitious payments brand, but as of the time of publishing this article, we could not confirm this information.