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Starbucks Sets an Example with Mobile Payments

Posted on Jul 15, 2013

By: Leilani Doyle & Vivian Le

Starbucks app logo

According to an article from PaymentEye, Starbucks is setting the example when it comes to accepting mobile payments. What started as a small “proof of concept” test in a limited region is now processing more than 3 million mobile transactions a week. The real key to success was building on the existing Starbuck prepaid card which already accounted for 20% of the chains purchases. Starbucks leveraged the popularity of this card to the mobile phone with apps for both iOS and Android.

Next, the company made an investment in POS systems and provided free wi-fi, which made it simple to access the app in each store. Starbucks also upgraded the registers at every coffee shop to insure that they were equipped to accept mobile payments. This eliminates any uncertainty consumers may have about whether or not they can use the mobile app to pay for their caramel macchiato. Customers are able to easily manage their accounts through their smartphone and there is even balance protection in case a customer’s phone gets stolen. It also helps that going to Starbucks has become a daily routine for many people; for these regular visitors the company does not need to convince them to stop in each day for a cup of java. 

The most important point in this article is that Starbucks equipped every store to accept mobile payments, which eliminated any guesswork regarding which retail locations accepts mobile payments. In order to fully utilize any mobile payment scheme, it must be accepted at every retail location. Also, Starbucks’ closed loop system actually gives the company a monetary incentive to continue using mobile payments since they don’t have to pay costly transactions fees to an outside processor. Closed loop, prepaid, and low dollar amounts all seem to go together for a successful mobile implementation. However, it is not likely that consumers would be willing to set up closed loop accounts for every retailer. Again, Starbucks has provided the industry a good model to follow in order to achieve success in the utilization of mobile payments.

Read the full article here