Starbucks Chooses Square for Payments and a Warmer Customer Experience

by Mercator Advisory Group 0

Today’s announcement that Starbucks has chosen Pay with Square as its next evolution in payments and customer interaction is a huge endorsement for Jack Dorsey’s payments company. In the autumn, some 7,000 Starbucks locations will gain the capability to interact with customers via Pay with Square.

Starbucks has offered its own mobile payment app since last year and processes more than a million mobile payments a week. Customers will continue to be able to use it, but they will also be able to use Pay With Square, Square’s cellphone app, which eliminates even having to take the phone out of your pocket or sign a receipt.

At first, Starbucks customers will need to show the merchant a bar code on their phones. But when Starbucks uses Square’s full GPS technology, the customer’s phone will automatically notify the store that the customer has entered, and the customer’s name and photo will pop up on the cashier’s screen. The customer will give the merchant his or her name, Starbucks will match the photo and the payment will be complete.

This ability to greet customers by name when stepping up to the barista is no small thing. Local retailers continue to exist largely because of the first name-based relationships they are able to develop, over months and years, with their best customers. Pay with Square will give those Starbucks baristas the ability to say “Good morning, Roberta, would you like your usual grande mocha grande?” That is a humanizing experience that will build on the customer service training Starbucks invests in its staff. This should be good for Starbucks.

This does not mean that Starbucks is using Square in whole cloth. In fact, it is simply adding Pay with Square to its MICROS-based software. The Square Reader is not being used. This is far better than trying to find room for an iPad at the already busy and cluttered Starbucks payment counter.

For Square, it is a potential break-out event. While two million Square readers are out in the market, the vast majority of users are service professionals, limo drivers, and micro-merchants. Relatively few consumers have seen Square in action. Now, millions of small business owners will see Pay with Square in action whenever they pick up their morning espresso. That exposure will expand Square’s presence in the market. Square will still have a lot to do to reach many small businesses with its fairly simple Register application. Because Square cannot write software for every type of merchant, the company may want to offer APIs to allow third party developers to build an app, for example to run a salon, around the core Square Register system. The fact that Square software is being deployed by Starbucks suggests that’s where the company is headed.

Needless to say, this very public validation of Square’s value will send tremors through the ISO and merchant service provider communities. While mobile payments in general are in the early stages of evolution, it looks like the Square branch is becoming one of the strongest on the tree.

Click here to read more from the New York Times.

This Featured Story was updated from a previous version.