9 Milestones in Starbucks' Mobile Payments Journey
January 31, 2014 3:55 PM
Five years ago, Starbucks was primarily a coffee company. Today, it's a pioneer in mobile payments technology with a significant portion of its U.S. transactions made using its smartphone app. And according to the company's CEO, this is only the beginning. (Image: ShutterStock )
Kevin P. Casey/Bloomberg
CEO's New Role
CEO Howard Schultz (pictured) is redefining his role as the company's boss. Instead of handling the company's day-to-day operations, he will focus on tapping the coffee giant's true potential as a mobile payments company. (Image: Bloomberg News)
F. Carter Smith/Bloomberg
Modest Beginnings
It all began in 2009 with a standalone iPhone payment app developed by mFoundry, accepted in just 16 stores . Starbucks eventually took development in-house and combined the payment app with its primary Starbucks app. (Image: Bloomberg News)
A Different Path
Even early on, Starbucks saw value in taking a different approach to mobile payments. Many banks and vendors brought their apps to Android after launching on iPhone, but Starbucks instead picked Blackberry as its second platform. Starbucks reasoned that many Blackberry-toting office workers would use its app to buy their morning coffee. (Image: ShutterStock )
A Big Target
To take its app nationwide in 2010, Starbucks adapted its mobile payment system to work with scanners already in place at the Target stores that house many of its its coffee shops. Suddenly, customers could use the Starbucks app in 1,000 more stores. (Image: ShutterStock )
Krisztian Bocsi/Bloomberg
A Rewarding Move
Starbucks linked its loyalty program to its payment app in 2010, a move that is still paying off. When redefining his job last week, CEO Schultz said the company's loyalty points have become "a currency
that can go further in the future and I think we're just beginning to understand that." (Image: Bloomberg News)
Square Deal
Starbucks made a $25 million investment in the mobile card acceptance company Square in mid-2012. At the same time, Schultz joined Square's board and Starbucks began using Square to process its payments. However, the relationship goes only so far Starbucks never used Square's hardware to accept payments, and in October 2013, Schultz stepped down from Square's board.
Security Issues
Starbucks has had a bumpy road to success. Early on, a customer stretched the card app's security to open up access to his account , allowing any Internet user to add and spend funds. More recently, a researcher exposed an issue in the app's iPhone version that might expose a user's password to a hacker. Starbucks took action in both instances. (Image: Bloomberg News)
Mega Momentum
By the end of 2013, Starbucks patrons were making nearly 5 million mobile payments a week , an 11% increase over the figure it reported in May 2013. Combined, the mobile and physical Starbucks card programs account for more than 30% of the company's U.S. payments. (Image: Bloomberg News)
Nelson Ching/Bloomberg
Beyond Baristas
Starbucks' next step in mobile payments may take it beyond its own stores. The company has already laid the foundation by offering reward points to consumers who buy its products in grocery stores . "There are things that we can take advantage of and that we can leverage that are outside of the ecosystems of Starbucks," Schultz said in January. (Image: Bloomberg News)
