Jack Dorsey: Today Starbucks Signed up for Square

by mynameisraj • 14 years ago

435 188 14 years ago

jcdavis3• 14 years ago

Wow, huge deal for Square. I'm very curious what the terms of the deal are: presumably Starbucks isn't willing to pay much more than what their current processing fees are (maybe a tiny bit more for the premium of being able to use Pay with Square?), so Square must be losing a decent chunk of change in exchange for the huge marketing and growth this gets them.

joelrunyon• 14 years ago

They mentioned the investment as part of a series D financing. I'm assuming any tradeoff in per/transaction costs is going to be more than made up in the scale and regular usage that Square is going to get from this partnership.

riams2• 14 years ago

Losing a decent chunk of change? How can they lose something they wouldn't otherwise have had at all? It's only normal to assume that they have special terms for Starbucks, but it doesn't mean they're losing anything.

Unless you mean that Square is providing the service at a loss to Starbucks?

jcdavis3• 14 years ago

Yes, I would guess they are providing this service at a (slight) loss to Starbucks.

philip12098• 14 years ago

"Starbucks isn't willing to pay much more than what their current processing fees"

Let us not forget that there may be a dichotomy in processing fees of credit cards at Starbucks between register-based transactions and digital/mobile-based Starbucks card reloads. Square doesn't have to beat the former to be competitive - only the latter, because it seems that Square will be on track to replace the current smartphone scanners at Starbucks registers.

Let us also not ignore that this is Starbucks offloading liability - when dealing with payments on a massive scale, one has to deal with a variety of frauds that may occur. With the current Starbucks card reloads before the point of sale, they may be starting to encounter fraud based on the volume of sales they encounter. However, Square has essentially specialized in managing this type of fraud. Hence, the Square partnership could simply be an acknowledgement that the Starbucks card payment system has become mainstream enough that it justifies a dedicated security division, whether it be internal or external, and that Starbucks opted for external Square.

lincolnq2• 14 years ago

I have heard that Pay With Square causes people to spend more money.

salman896• 14 years ago

Anecdotal, but at a sandwich shop the other day, I tipped $1 when the cashier handed the iPad to me. Not sure if I would have done the same when signing a regular receipt.

daveying99• 14 years ago

With billions in revenue per year, Starbucks has direct advantageous deals with credit card companies that probably follow them no matter what transaction system they use including Square. In other words, they are likely to pay less than the standard Square fees.

ry0ohki3• 14 years ago

Starbucks is very good at staying on the cutting edge. They were one of the first to offer FourSquare specials, iTunes credits, and they seem to partner with just about any semi-relevant startup out there.

joering2• 14 years ago

Can someone explain me what it means for customers? As far as NYC goes, each Starbucks accepts Visa, Master Card, Discovery and American Express (the card that plenty businesses hate). So what is the benefit for the customers?

salman896• 14 years ago

https://squareup.com/pay-with-square

Smart phone based wallet, a la Google Wallet.

ben10404• 14 years ago

One cool feature about the Square mobile app is you can set up geofenced "tabs" that automatically get opened if you get close enough to an establishment.

So you keep your phone in your pocket, walk into Starbucks and order a drink as you do every morning. You tell them "put it on John's tab." You get a receipt in your email immediately thereafter, and never have to pull out your phone or wallet.

euroclydon• 14 years ago

Doesn't this now or won't it eventually dismiss with the credit card portion all together thus making the margin available to Square?

mapster• 14 years ago

I always look at my receipt upon purchase, even for a $7 latte and scone. This may require a leap of faith beyond most people's comfort zone, at least initially. But very promising.

endeavor• 14 years ago

The cashier is just going to look at me totally lost. Even in Silicon Valley, maybe one in 100 customers is going to use Square.

I don't see the value for Starbucks customers either.

bobsy• 14 years ago

Question: Yesterday I saw you in Starbucks and heard you say "put it on John's tab". Today I see you are 2 behind me in the queue. What stops me from strolling up to the counter, big grin and saying... Put it on John's tab please?

Wouldn't the proximity of your phone mean they would take the payment from you even though you haven't authorized it?

martinkallstrom• 14 years ago

Is there any information available on how this works with iPhone? Does the app have to be running in order for the geo-fencing to work? Thankful for any information on this.

jeffgreco2• 14 years ago

Starbucks isn't supporting the geofencing: http://www.splatf.com/2012/08/starbucks-square-payments/

philip12098• 14 years ago

> "[. . . ] American Express (the card that plenty businesses hate) [ . . . ]"

This is divergent, but I feel compelled to defend Amex here on the basis of quality of leads and consumer ethics, with the main contention being a higher processing fee for Amex relative to Visa and Mastercard.

# Quality of leads

"Amex cards account for approximately 24% of the total dollar volume of credit card transactions in the US, the highest of any card issuer" [1].

In general, merchants absorb credit card fees because they allow consumers to make purchases in more spur-of-the-moment situations. For example:

* "I want this $4 coffee, but I don't have cash. Without a credit card, the purchase would not occur."

* "I want this $1000 refrigerator, but I lack the cash to pay for it all at once. A credit card allows me to purchase it now and deal with the implications later as I pay for it over time."

* "I want this $1000 refrigerator, but I don't normally carry that much cash on me, so making this impulse decision is enabled by my credit card."

* "I want to buy a $400 lunch for our client, but I can't have direct access to my company's money."

American Express may charge a higher percentage per transaction, but Amex users in general spend 2x-4x per transaction relative to other credit-based cards [2], thus in the end justifying their higher fee per transaction overall in the business that credit cards generate. This is due to both the demographics of consumers using Amex and the higher percentage of businesses using Amex. Thus, the lattermost two situations above are ostensibly inflated for Amex, therefore justifying a higher percentage fee.

For smaller retailers, they may see that only 10% of their customers use Amex, but they may neglect to factor in the whole buying process of "I lose ~20% of revenue if I refuse Amex, because Amex users spend double per month, so the 50% upcharge over Visa/Mastercard is justified." Starbucks understands this, which is why they do not refuse an Amex for a $1 cookie - they understand that the guy purchasing $30 of coffee for the business meeting is likely doing so on a company Amex.

So, while a retailer may be angered by the occasional Amex user who brings tighter margins, in the overall scope of things the quality of lead is sufficiently higher for Amex users to justify a higher percentage fee.

Note: Here I use "quality" for a lead to represent frequency of purchase, per-purchase volume, and credit reliability.

# Consumer Ethics

I personally use an Amex charge card for my day-to-day transactions because of the revenue breakdown of Amex verus the other major cardholders.

"Visa and MasterCard get about 20% of their revenues from merchant fees. American Express gets 65% of its revenues from merchant fees, because it relies less on interest payments (most American Express card holders don't carry a balance)." [3]

This is an opportunity for me to 'vote' with my pocket book, and I think that the yearly cost of an Amex justifies the service. A fradulent transaction is easy to erase because American Express profits from me as a happy and successful consumer. Furthermore, with a charge card, I cannot dig myself into a pit of debt - if I cannot pay my transactions one month, I cannot continue charging the following month, thus hurting both me and American Express. The business model is profitable when I balance my finances and maintain good finances, whereas the other major card companies profit mainly when I start to fall into a pit of debt. I feel that this revenue model thus benefits me as a consumer, rather than intentionally setting me up for failure.

Overall:

As an entrepreneur building my own businesses, I accept Amex because I value the free market decisions of my consumers to use Amex, and in the overall scope of transactions, their educated decision behooves both of us.

[1] http://en.wikipedia.org/wiki/American_Express

[2]http://www.wikinvest.com/stock/American_Express_Company_(AXP...

[3] http://seekingalpha.com/article/20331-guide-to-credit-cards-...

salman896• 14 years ago

While I agree with some of your points here, you are ignoring that an Amex user does not have a second card based method of purchase.

I would assume that most Amex users always have another method of payment, considering how likely they are to run into a situation where Amex is not accepted.

With this logic, the business will only lose revenue from customers whose only form of payment is Amex - I think this would be a small subset.

lmm• 14 years ago

So Amex only offer their cards to rich people (who are better at managing their balances, and spend more money), and then uses the fact that their customers are rich as leverage to charge merchants more? And you see this as a positive?

AjithAntony• 14 years ago

>"Visa and MasterCard get about 20% of their revenues from merchant fees. American Express gets 65% of its revenues from merchant fees, because it relies less on interest payments (most American Express card holders don't carry a balance)." [3]

Real citation needed. That Seekingalpha link is very wrong. Visa and MasterCard probably derive 100% of their revenues though merchant fees and similar. They neither lend money nor collect interest from consumers. The usurious interest rates and fees that you are trying to "vote" against are coming from the banks that issue the cards. Visa And mastercard profit by encouraging use of their card networks for every purchase. They don't care about your "pit of debt."

I'm not sure how paying an annual fee to Amex and forcing merchants to process your expensive card is helping anyone other than further enriching Amex, which in addition to being a payment network, is also operating as a bank as far as extending loans to and collecting interest from its "cardmembers." If Amex's other value added services such as rewards, return protection or whatever make it worthwhile, for your business to pay the membership and merchant fees then so be it.

My personal "vote with my dollars" strategy is to use cash for transactions where a credit card does not add value to my user experience and not to unnecessarily punish businesses with small purchases on credit. I use a Visa card because it is accepted most everywhere. I do use a "rewards" card so I do carry some guilt for any extra merchant fees that may incur.

  - Pay for gas at the pump: credit.
  - Pay for online goods: credit.
  - Pay for an expensive item with not enough cash in pocket: credit
  - Pay for a $2 coffee: cash
  - Pay for a round of beers at the pub (where a credit card will add an extra round trip for the bartender to get back to me): cash
  - Pay for anything at a local restaurant: cash
  - At McDonalds and somewhoe don't even have $2 in my pocket: credit

https://materials.proxyvote.com/Approved/025816/20120301/AR_...

http://media.corporate-ir.net/media_files/IROL/21/215693/Vis...

mjw• 14 years ago

"Amex cards account for approximately 24% of the total dollar volume of credit card transactions in the US"

Personally I use amex for all large transactions because they give me a cut (I think around 0.5% cash equivalent?) in air miles, but don't usually bother with it for small transactions because I don't want to risk it being turned down, or take the piss with small merchants who might suffer from the processing fees.

Perhaps this kind of behaviour explains their bigger cash volume, rather than their customers necessarily being bigger spenders in total across all the cards available to them.

chermanowicz• 14 years ago

Either I missed a post somewhere but I don't think any has answered your question... I'm also wondering what the benefit for customers will be....

salman896• 14 years ago

I think more than any other benefit, Square has been validated by a premier American chain. It will be a much easier sell to other large chains. The big money for Square is in having these large customers with multiple POS deployments, where overhead will be small compared to revenues, at least relative to single shop customers.

It will also put their product in front of end customers, many for the first time. I for one have heard/read about Square since they first started shipping readers, but had not actually seen the product in action till last weekend (live in Silicon Valley).

notatoad2• 14 years ago

Yeah, with this announcement square's sales pitch has effectively become "well, starbucks uses it..."

pnathan• 14 years ago

enterprises run on "some other big company uses it".

This is a major coup for Square. I've said it before, I'll say it again: I look forward to the IPO. Square has value.

pbreit2• 14 years ago

Interesting. Starbucks is obviously not going to use the error-prone dongles. I suspect Square will provide some sort of custom "Pay With Square" solution, perhaps tied into Starbucks' existing point-of-sale system. Any way you look at it, it's a huge deal for Square, Starbucks is absolutely the best venue for Square and likely the key building block to really push out a new checkout experience such as "Pay With Square".

spullara2• 14 years ago

Pay with square app doesn't use the dongle at all.

pbreit2• 14 years ago

The note talks about processing all Starbucks cc txns.

faramarz• 14 years ago

This announcement makes me happy, for Square and Jack Dorsey as a young business leader. I love everything about the business idea, execution, design and tone of the overall strategy.

Noteworthy points from the press release

  The partnership terms include:
  - Customers will be able to use Pay with Square, Square’s payer application,
  from participating company operated U.S. Starbucks stores later this fall, and 
  find nearby Starbucks locations within Square Directory;

  -Square will process Starbucks U.S. credit and debit card transactions, which 
  will significantly expand Square’s scale and accelerate the benefits to businesses 
  on the Square platform, especially small businesses, while reducing Starbucks 
  payment processing costs;

  - Using Square Directory, Starbucks customers will be able to discover local 
  Square businesses -- from specialty retailers to crafts businesses -- from 
  within a variety of Starbucks digital platforms, including the Starbucks 
  Digital Network and eventually the Starbucks mobile payment application;

  - Starbucks will invest $25 million in Square as part of the company’s Series D 
  financing round;

  - Starbucks chairman, president and ceo Howard Schultz will join Square’s 
  Board of Directors.

https://squareup.com//news/releases/2012/square-starbucks

philip12098• 14 years ago

Also, this is a big win for Jim McKelvey.

(disclosure: I am a WashU student and Cultivation Capital intern)

jevinskie• 14 years ago

"Square will process Starbucks U.S. credit and debit card transactions":

Wikipedia says that Starbucks has $11.7 billion in revenue every year. I would assume that a majority of that revenue is through a card. I am not familiar with Square's revenue but I feel that this will at least double their transactions. Am I correct?

bigiain• 14 years ago

"I would assume that a majority of that revenue is through a card."

Really? I almost never use a card for café type purchases. Maybe if I were buying a meal, but for a coffee or two I'm 99% likely to use cash.

(Note: mine is an Australia-centric view, perhaps things really are very different in the USA?)

salman896• 14 years ago

Will have an impact also in terms of economies of scale. Their transaction fees _should_ go down as they process a larger number of transactions. Makes the partnership much more strategic, and it makes sense why Starbucks also invested - might have been part of the package.

philip12098• 14 years ago

Your first stated assumption is correct, but do not assume that all of Starbucks credit card transactions are processed through Square. Thus, the second assumption is not linear.

raverbashing• 14 years ago

Question

How does SB gets smaller fees through Square than negotiating directly with card providers?

How do card providers allow Square to sell their services cheaper than themselves?

And Square, you sure have a nice business, but the magnetic stripe is very insecure.

kayoone• 14 years ago

Here in Europe (Germany) i have never seen anyone buying a coffee with a credit card. Maybe debit card, but that also is rare, its mostly cash for these small transactions. Most coffee shops dont even take any cards at all, even here in germany!

nchlswu• 14 years ago

That seems like a reasonable assumption.

A lot of posters are forgetting that significant portion of Starbucks revenue isn't from beverages at the till. Starbucks sells a lot of coffee related goods and processes a lot of revenue for gift cards and their mobile payment app which they've had for quite a while (Apple recognized in iOS6 Cards).

I'm very curious if Square is going to handle all transactions that aren't at the physical point of sale. My gut feeling is that a big chunk of credit and debit revenue is for gift cards and gift card refills and that could impact your estimate.

ranvir• 14 years ago

This sounds like a huge coup for Square. And a little surprising that they could actually (or already) provide card processing at a better rate than Starbucks could negotiate on its own.

gootik• 14 years ago

While I'm happy for Square, I'm saddened that Starbucks gets special treatment. Why is Starbucks (a well known brand) getting a personal post written by Jack, when Square's "goal" is to promote and help small businesses?

Maybe a more subtle way of informing the world about this partnership was better.

hboon• 14 years ago

They want to be loud because having Starbucks on board both as a customer and investor is a strong vote of confidence for Square. They want prospective customers and existing customers to know that.

riams2• 14 years ago

It's not a zero sum game. As more mainstream consumers learn about and start using Square, it will undoubtedly give a great boost to small businesses using Square as well.

stock_toaster• 14 years ago

  > Why is Starbucks (a well known brand) getting a personal post written by Jack, when Square's "goal" is to promote and help small businesses?

Maybe the 25 million Starbucks invested in Square?

philip12098• 14 years ago

Square just finished a round of venture funding, but by getting Starbucks as a long-term client means they have a consistent revenue against which they can secure credit, i.e. the owners do not need to further dilute their shares to obtain funding if they can prove to banks that they have income, thus making it easier to secure a loan.

timjahn• 14 years ago

" - Starbucks will invest $25 million in Square as part of the company’s Series D financing round;"

Wait, what? Is this Starbucks buying a slice of the decision making process to ensure things are generally in their favor?

mattmaroon• 14 years ago

Sure. Companies often invest in other companies. Google Ventures is an example of this. Microsoft invested in Facebook then promptly integrated connect into Bing, Xbox Live and Outlook.com (with probably more to come).

Starbucks can benefit from the Square deal, invest in them, and help promote them all at the same time. Actually pretty brilliant.

dclowd9901• 14 years ago

It occurs to me that, with Square as a partner, Starbucks stands to gain a lot from the partnership. If you think that most of their transactions are in small amounts (under $7 generally), and most of those transactions are done by credit card (I'm making a presumption about affluent individuals' purchase patterns), is it possible they're trying to turn the price they'd normally pay for transactions into investment capital? They were pushing those Starbucks refill cards like crazy a while back..

alanh• 14 years ago

It’s also currently hard (impossible?) to add a tip to Starbucks credit card orders. (I assume this is done to minimize time spent on each customer.)

Square makes it ridiculously easy.

akent• 14 years ago

Jack's signature is "@jack"? Nice.

NHQ• 14 years ago

The announcement aside (line 1 of 20), this "letter" is some poor PR spew. Jack, if you're listening, you need a personal letter stylist. Letters are like jeans that people read.

fredsanford2• 14 years ago

Is this yet another middle man to suck fees out of the system? I have not kept up with Square but despise the though of yet another fee leech that is compiling a list of my purchases to sell to annoying advertising companies.

/shoutAtClouds

dm83• 14 years ago

> yet another fee leech that is compiling a list of my purchases to sell to annoying advertising companies.

Square's business model is transactional. It's not advertising based!

fredsanford2• 14 years ago

Read closer.

"compiling a list of my purchases" Visa, Amex, Discover, Mastercard... All do this and are transactional.

"to sell to annoying advertising companies" And this.

dredmorbius3• 14 years ago

Holy grey-on-grey readability disaster, Batman!

And shouldn't 140 characters have been enough?

dm83• 14 years ago

Skeuomorphism can be horrible if it's not done properly!

ronaldj• 14 years ago

All the cool kids are talking about skeuomorphic design lately.

duaneb• 14 years ago

Actually, horrible is pretty much the default.

armandososa• 14 years ago

how's that skeumorphic?

tb303• 14 years ago

http://skeu.it/post/28959935757/square-letter

medinismo• 14 years ago

I really do not see the benefit of this deal. Square - sure, another bunch of retailers. Starbux, not so much. NFC will take over and then square is out. can someone explain?

cdcarter• 14 years ago

NFC hasn't taken over yet. Pay with Square offers something pretty close feature-wise, and is establishing residence in the market. Once NFC works well, Square can adopt it and rule.

gojomo2• 14 years ago

There is also the chance that Square (and similar geolocation- and photo- based heuristics) will make NFC superfluous. Why NFC when a human-to-human word or gesture is faster, more natural, and just as reliable?

erikpukinskis• 14 years ago

Square works on any phone with GPS, which is not true of NFC.

And Square, Inc. is making a brilliant "Trojan Horse" series of business moves to bootstrap adoption in both users and vendors. They get vendors using the Square app by providing plastic processing, they get users using the app by providing convenient tabs... as smartphones become ubiquitous, they don't have many limits to growth.

NFC on the other hand... Who is going to be the jockey that rides NFC in the race? Google? What will Google be able to offer to vendors that Square doesn't? I can't think of a single benefit of NFC over Pay With Square from the vendor's point of view. And Google will never pound the pavement the way Square is. They just have too many other fronts to fight on.

fredsters_s2• 14 years ago

"NFC will take over"

Care to evidence that assumption just a little bit?

AaronBBrown• 14 years ago

One thing about NFC is that it does not require an active data connection, whereas Square does. That may not seem important, but for those of us who live in the middle of nowhere, it's relevant. I'm not sure that it's relevant enough to change wide-scale adoption patterns, but in my small town, there are multiple locations in CDMA black-holes that are PayPass enabled, thus accept Google Wallet. Every single Mobile station, and nearly every other big-chain gas station is already set up for NFC.

According to the Square App, I have to drive 11 miles away to find the nearest accepted location.

Ultimately, I think both will operate in parallel for quite some time until Apple decides to release something and takes over the world of payments overnight. :)

bootload• 14 years ago

"... I am pleased and proud to announce that today Starbucks signed up for Square ..."

Starbucks has a history of taking risks with startups ~ https://en.wikipedia.org/wiki/Kozmo.com

philip12098• 14 years ago

However, here I feel that Square enhances the Starbucks core value of creating an intimate coffee experience.

# With Square:

"I am Jack and I would like [. . . ]"

(clicks name with face on screen to charge; receipt emailed automatically) "Ok, Jack, your total was [. . .] and here it is"

# Current Method:

"I would like [. . .]"

"Ok, your total comes to [. . .]"

[exchanges credit card]

"Would you like your receipt?"

"No, thanks"

"What name would you like on the order?" (while holding credit card with name on it - hence this step is meant to increase intimacy)

"Jack"

"Ok, here is your drink"

The Square system makes transactions shorter and simpler, and it humanizes the experience

jordo37• 14 years ago

Awesome news for square. I am very eager to see how this changes the natures of: 1) The Starbucks App - will square replace it outright or will there be an option to use starbucks or square? 2) Paying with a card at starbucks - same registers or new registers with square dongles? Hopefully its a better dongle if so...

PS - Anyone noticed how they seemed to be stepping around the idea of those local businesses being other coffee shops? Craft businesses in the Press Release...like craft coffee shops?

jarek2• 14 years ago

Android Starbucks app "card" payment was just rolled out to Canada and the UK last month - I doubt it'll go anywhere for a while for these locales. It might be interesting to see if any payment technology roll-outs beyond US/UK/Canada go with Starbucks-powered stuff or Square stuff. I'm guessing Starbucks for now.

msantos• 14 years ago

This entry is duplicated First entry is in http://news.ycombinator.com/item?id=4353817

barrynolan• 14 years ago

It's a great validation of developing and iterating the business initially with the small 'mom & pop' business to the point where traction allows you capture the really massive customers.

chollida1• 14 years ago

Is this just for Starbucks US stores or is it for all of North America?

If it's just for US stores then the title should probably be amended. Being a Canadian, I've never seen a merchant using a square device.

abalone4• 14 years ago

Here's what's in it for Starbucks: Square's cheaper.

Square loses money on transactions below $6. The reason is for the sake of simplicity they waive the per-transaction fee that Visa/Mastercard charges them and just charge a flat percentage of 2.75%. But even though this is a relatively high percentage, it's not enough to recoup the cost of the per-transaction fee at low transaction sizes.

Take a $2 coffee charged to a Visa credit card. Visa charges Square 1.76% + 6 cents, or 9.5 cents. But at 2.75% Square only collects 5.5 cents.

So even if Starbucks was already paying wholesale Visa/Mastercard rates, they'll save 4 cents or more a cup thanks to Square's "simplicity subsidy".

Now multiply that by a few billion cups. Starbucks saves millions, and Square is happy to pay it to drive their growth into the stratosphere.

Source: http://feefighters.com/blog/can-square-make-money-with-its-n...

jusben13693• 14 years ago

I would point out that it's unlikely SB's received the same financial terms offered to Mom and Pop vendors who sign up via the website.

abalone4• 14 years ago

Maybe, but they wouldn't need to for the deal to be attractive. Square's regular rate is already below wholesale processing for small transactions.

whalesalad• 14 years ago

Absolutely. This has got to be a huge partnership and I'm sure everything is going to be custom/branded. I'm anxious to see how Starbucks handles this. Will they use iPad kiosks that the user can interact with? Part of the Starbucks experience is being able to custom order a half-caf splash-of-cinnamon dolce latte with soy. Having a nifty UI to deliver that experience + an easy way to pay might be a good strategy. Will this tie in with their own Starbucks app so that I can order on my walk to Sbux, auto pay, and then walk out without waiting in line?

pja• 14 years ago

"We'll lose money on every transaction, but make it up on volume!"

I'm going to optimistically assume that Square have run the numbers and this deal is worth the price though. As a marketing exercise alone it could be worth a fortune if it ends up putting Square's branding in every Starbucks.

ceejayoz2• 14 years ago

> As a marketing exercise alone it could be worth a fortune if it ends up putting Square's branding in every Starbucks.

Very much so. People who see a Square dongle at the farmers' market will now go "oh, I saw that at Starbucks", not "that guy might steal my credit card with that".

adg• 14 years ago

> Visa charges Square 1.76% + 6 cents

Last I checked, Square had not published the transaction fee they negotiated with Visa.

abalone4• 14 years ago

Interchange is a fixed non-negotiable set of rates, published by Visa & Mastercard. See http://usa.visa.com/merchants/operations/interchange_rates.h...

jusben13693• 14 years ago

The initial advantage Square had was “green fields” Most of their customers didn’t accept Credit Cards so they did not have incumbency issues. That’s what makes this win impressive. However, it also highlights just what Square has to go through to win a very large account. SB’s had to agree to tear out and replace their existing POS system. That’s a big risk, headache and cost and customers will use that leverage (and genuine pain) to drive hard bargains.

Also worth noting is that SB’s mentions processing costs will be cheaper. It’s hard for me to imagine that SB was overpaying with their last vendor so I worry about the economics on this deal. Maybe it’s the anchor tenant though that allows for additional enterprise deals to follow so is worth it. I can imagine other large retail organizations that had any interest were on the sidelines saying "It's one thing to service 10,000 food trucks but come on!" They'll stand up and listen now with this.

twoodfin2• 14 years ago

Does this save money for Starbucks over their own branded card? Due to the rewards available, I'd assume many of their highest volume customers are using it, and would be unlikely to switch to Square unless those rewards were transferable.

spoiledtechie• 14 years ago

I signed up for square about a month and a half ago. I ordered my little device at the same time and it still has not showed up at my door step. To me, they have been a lousy service so far sadly.

rayhano• 14 years ago

Once Starbucks are on the Square system, might that be the perfect opportunity for Square to flip a switch and ask customers for their bank details?

If Square could do a GoCardless with all those consumers that use Square, both Square and merchants could benefit massively...

superbeefy• 14 years ago

I really hope square improves their reader. Practically every time I've used this system, as a customer, it seems to take a couple of tries before it actually recognizes the card. This may be okay for lower volume businesses, but for starbucks I could see this backing up lines.

kpozin• 14 years ago

They also charge more if you have to key in the card manually (2.75% per scan vs 3.5% + 0.15 USD per manual entry).

mh-• 14 years ago

this is because it's processed as a card-present vs card-not-present transaction. different fee (& risk) brackets.

lhnn• 14 years ago

Can someone explain this to a layman who "only" uses credit cards at the moment? How is whatever this is going to make my checkout at Starbucks quicker or more convenient than a card or a $5?

apawloski• 14 years ago

Although there do seem like there are benefits for "laymen" -- paying for something by simply saying your name sounds interesting -- this isn't really directed towards you. Generally, you would likely still use your credit card with it, so your experience wouldn't be much different (positively or negatively).

It's beneficial for business owners who save money by using Square and use various incentives and analytics that come with.

OJKoukaz• 14 years ago

So does this mean that Starbucks will use the same Square interface that we layfolk use? I find it impractical that they use this, and not something that integrates with their existing systems, but then that would mean that Square has opened up some sort of API to them? When will the rest of us get to see something like this, if so?

Jack Dorsey: Today Starbucks Signed up for Square

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