Square to Process Card Payments for Starbucks
August 10, 2012
The most visible mobile payments startup and the merchant with the most successful mobile app this week revealed they have joined forces. Seattle-based Starbucks announced it will use Square to process credit and debit card payments in its 7,000 U.S. locations. The coffee giant also said it will invest $25 million in Square as part of the mobile payments provider’s latest round of financing. For Square, the San Francisco mobile payments company that has become one of the highest profile startups in the payments industry, the announcement could be the most significant in the company’s history and could provide a huge boost to mobile payments in general.
“As the largest retail mobile payment platform in the U.S., we’re excited and proud to accept payments with Square,” said Howard Schultz, Starbucks chairman, president and CEO. “The evolving social and digital media platforms and highly innovative and relevant payment capabilities are causing seismic changes in consumer behavior and creating equally disruptive opportunities for business.”
While the announcement is significant for both companies and consumer adoption of mobile payments, experts warn that as larger national retailers begin to adopt systems like Square’s, fraud will assert itself as more of an issue. At the CNP Expo this spring, Steve Kirsch, CTO of authentication technology provider OneID, addressed the issue specifically in regard to Square, which at the moment is experiencing very little fraud.
“When some big merchant starts accepting Square, that’s when the fraudsters will go after [mobile payments] much more aggressively,” Kirsch predicted at the time.
Initially, there won’t be much mobile in the mobile payments company’s card acceptance solution. Starbucks will use a version of its existing POS system to swipe the cards and its mobile platform will continue to leverage the Starbucks mobile app and the Starbucks Card. Eventually, coffee drinkers who want to pay with credit or debit cards will be able to use Square’s Pay With Square app that will enable consumers to leave their phone in their pocket and just give their name.
While fraud may be a growing problem for mobile payments as more retailers like Starbucks come online with their solutions, according to Kirsch, when Square works out how to authenticate the user’s photo that accompanies Pay With Square, the app has the potential to be “way more secure than a card-present transaction.”