Starbucks Outperforming Banks?

by Mercator Advisory Group 0

While Starbucks can certainly provide better coffee than what’s usually available in bank branches, its prepaid cards might be outperforming those offered by traditional financial institutions as well. According to quarterly earnings reports, in the first fiscal quarter of 2013, Starbucks added 1.4 million news members to its loyalty program, up 86 percent from the year prior. Furthermore, in the second fiscal quarter, the amount of dollars loaded on to their prepaid cards through both new card activations and reloads grew by 32 percent from the year before.

However these aren’t the only statistics highlighting the success of Starbucks in their prepaid program. Overall Starbucks customers add $3 billion to their prepaid cards on an annual basis and now one-third of all Starbuck transactions are made using prepaid cards. To put the success of Starbucks in perspective, the $3 billion deposited on Starbucks cards puts the coffee company ahead of nearly 7,000 small U.S. financial institutions who on average maintained $185 million in deposits in 2011, according to the FDIC (Federal Deposit Insurance Corporation).

The success at Starbucks has not gone unnoticed with many other merchants trying to replicate or simply gain from the momentum generated by Starbucks and their prepaid and loyalty programs. The fact that companies like Starbucks are able to achieve more deposits without a banking license and FDIC insurance is definitely a positive indicator for other large merchants and anyone in the prepaid and mobile payment space.

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