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Square's Loss Is Chase's Gain: Starbucks Replaces its Payments Processor

In Spring 2016, J.P. Morgan Chase will replace Square for payments processing at Starbucks, the leading coffee place in the US. WSJ reported the separation of Starbucks and Square back in December 2014 but today Starbucks announced the selection of Chase Commerce Solutions, the global payment processing and merchant acquiring division of JPMorgan Chase & Co. to transition processing of all non-mobile payments and U.S. retail card payment transactions in company-operated stores in addition to partnering on the rollout of chip-enabled payment terminals.

Kevin Johnson, president and chief operating officer, Starbucks said, Our new relationship with Chase Commerce Solutions, combined with the sophisticated chip enabled technology we are deploying across our U.S. store portfolio, lays the foundation for a coming wave of innovation in our digital payment ecosystem. These investments and innovations will both strengthen our payment platform and be increasingly accretive to our business over time."

We know that JP Morgan Chase is an investor in Square, and Square used the bank's Chase Paymentech subsidiary to process debit and credit transactions. However, Chase Commerce Solutions is now replacing Square to serve a better deal for both the parties. After Square’s IPO filing, it was evident that the Starbucks deal was a big loss for Square. Square lost more than $56 million in the past 3 years from Starbucks transactions. Square clearly mentioned that their Starbucks contract will cease to continue from Q3 2016.

Source: https://www.sec.gov/Archives/edgar/data/1512673/000119312515343733/d937622ds1.htm

First Data will continue to service 9 million mobile transactions every week at Starbucks. Starbucks continues to innovate in its products and services A recent example is the Mobile Order & Pay feature that allows customers to choose a store from a map view, browse, select and customize beverage and food items, view the estimated timeframe in which the order will be ready, and pre-pay for the order - all within the Starbucks Mobile App. Starbucks is also planning the Starbucks Green Apron Delivery service’s pilot that will allow Empire State Building tenants in Midtown Manhattan to order a selected set of food and beverages via a dedicated website. Beverages will then be handcrafted by Starbucks baristas in a designated kitchen within the building.

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