Through the partnership, consumers can pay for their beverages using Pay with Square – the company’s mobile application – from participating Starbucks locations this fall. The partnership is further proof that Starbucks means business when it comes to mobile payments, and the company is continually paving the way and making a name for itself in the mcommerce space.

“Square is red hot, as they provide an easy way for smaller merchants to allow credit card checkout, from a smartphone,” said Wilson Kerr, vice president of business development and sales at Unbound Commerce, Boston.

“Unless Starbucks is planning to replace their checkout systems with smartphones, or arm baristas with the ability to walk the store and sell coffee on the go, I am not sure I see the fit,” he said. “Starbucks is a clear leader in the space and it’s no surprise they are linking up with the best and brightest.

“They have created a private label mobile commerce system that smoothes checkout and delivers real value to their loyal customers. They are also likely mining a mountain of consumer behavior data to sharpen what they offer to whom and when.”

Mr. Kerr is not affiliated with Starbucks. He commented based on his expertise on the subject.

Starbucks and Square did not respond to press inquiries.

Payments exploration
Through the partnership, Square will process Starbucks U.S. credit and debit card transactions.

Beginning this fall, in addition to Starbucks’ existing iPhone and Android mobile payments app, consumers can also pay using Pay with Square.

Customers can download the Pay with Square application and set up an account.

Using the Square Directory, Starbucks customers can find the nearest location, as well as other specialty retailers.

Additionally, the coffee giant will invest $25 million in Square as part of the company’s Series D financing round and Howard Schultz, chairman/president/CEO of Starbucks will join Square’s board of directors.

This partnership is a smart move for Starbucks, especially as the company looks to reign the mobile payments space.

Although mobile payments are still new, the trend is quickly being adopted by both merchants and consumers.

Mobile enhancements
Both Starbucks and Square have been heating up the mobile payments space.

In April, Starbucks revealed that it processed 42 million payments via its mobile application.

Back in December, Starbucks reported that 26 million transactions had been processed via the mobile payments app since its January 2011 launch (see story).

In June, Square added new loyalty features to its applications for consumers and merchants, including an in-app punch card, with the goal of helping businesses attract new customers and drive repeat visits (see story).

“The Starbucks, Square partnership represents a significant milestone in the advancement of mobile payment and digital wallets,” said Denee Carrington, an analyst at Forrester Research.

“Customer recognition, embedded loyalty and faster checkout is what Square enables for its existing merchants,” she said. “If the Square/Starbucks duo can successfully deliver a more convenient, contextually relevant and compelling experience then consumers will look forward to using the Pay With Square digital wallet at Starbucks and with their other favorite merchants.

“It also will set a new a standard for the type of compelling experience consumers will know is possible and come to expect when using a mobile digital wallet.”

Final Take
Rimma Kats is associate editor on Mobile Commerce Daily, New York