Your Smartphone buys you a Starbucks Coffee

Source: Strabucks Coffee

Transactions through mobile wallet apps in 2012 accounted to over $500 Million in Revenue according to a report from Berg Insight. If you’re in the banking industry you will know that $500 Million is a very small number in comparison to the numbers posted by debit and credit card transactions every year. What’s most interesting about the $500 Million is the location of those transactions i.e. at the Starbucks stores in the USA.

Starbucks has been a pioneer in the mobile wallets payment field. Starbucks introduced the mobile wallet payment system in 2011 at over 7,500 locations in the USA through a Starbucks mobile card app made available for iPhone and Blackberry handsets. The mobile card app works on a simple math principle. A user loads funds through mobile card app by linking it with a PayPal account or Credit Card. At the retail outlet, the user flashes smartphone with the mobile card app to the register which reads the barcode on the smartphone and deducts the funds according to the value of purchase made at the retail outlet.

To ensure customer retention and increased use of its mobile wallet payment service, Starbucks has integrated their Starbucks mobile card app with Starbucks pre-paid cards and my Starbucks Rewards program. According to Starbucks, the Starbucks mobile card app was used approximately 2 Million times each week in 2012.

Back in August 2012, Starbucks partnered with Square to launch Square Wallet app on iOS and Android based mobile phone devices. Starbucks invested close to $25 Million in Square to process its U.S. credit card and debit card transactions. Square Wallet is more or less similar to the Starbucks mobile card app but the main difference being that the Square Wallet can be used for transactions at other vendor outlets and the users need top off with funds to use Square Wallet as its integrated with debit card and credit card information.

In terms of use, most of the debit card and credit cards users still feel that the ease of transaction at the Point of Sale using a card over smartphone is still preferred over the latter. The reason being lack of knowledge on how to process a transaction by the employees at Starbucks and lack of awareness of the merchants other than Starbucks who offer such payment technology over traditional payment methods.