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Starbucks caffeinates mobile payments with over 2M mobile transactions per week

By
November 5, 2012

The Starbucks mobile app

Starbucks continues to expand its role as a leading mobile payments provider as evidenced in comments made last week by a company executive who said more than 2 million mobile payment transactions occur every week.

The comments were made by Howard Schultz, president/CEO of Starbucks, during a conference call with analysts to discuss the company’s fourth quarter results. Mr. Schultz also said that the burden is on companies to recognize the seismic change in consumer behavior as a result of the emergence of mobile commerce and mobile payments as well as social and digital media.

“We believe the rapid adoption of mobile gives us an opportunity to create a unique and much deeper relationship with our customers directly and in the moment like no other consumer brand or retailer,” Mr. Schultz said during the conference call. “We have the unprecedented ability to reach new customers, create awareness to new products, drive incremental transactions and explore new revenue streams in music and digital publishing.”

Payments squared
Mr. Schultz also reported that Starbucks has had more than 100 million mobile payment transactions since the Starbucks mobile app launched in January 2011.

The number has jumped since early October, when Starbucks said the app had seen over 70 million mobile payments.

Starbucks continues to look for ways to expand its mobile payment offering and recently partnered with square. As a result, later this month Starbucks customers will be able to use the square wallet app to pay for purchases with their mobile phones.

Additionally, the company has plans to include tipping as a mobile payments feature next year and is also looking to add mobile ordering and personalization.

Overall, $3 billion has been loaded on to Starbucks cards this year, with Starbucks card transactions accounting for more than 25 percent of sales in U.S. stores.

The my Starbucks rewards loyalty program has more than 10 million members, half of whom have opted in to receiving communications from Starbucks. Starbucks recently enhanced its loyalty program in the U.S. and Canada to make rewards fully digital and to make it easier for customers to earn free rewards.

“Selling an addictive substance on every street corner in America is probable more of a factor in their mobile success than their technology innovation,” said Gary Schwartz, author of “The Impulse Economy” and “Fast Shopper, Slow Store.”

“Another factor for their success is their openness to a simple frictionless payment process,” he said. “Starbucks mobile POS manages prepaid ‘micro’ transactions and thus has the luxury of making checkout painless without much concern for fraud on their system.”

Pay it forward
Starbucks continues to embrace mobile as a strategy beyond enhancing in-store payments.

The company is currently running a mobile advertising campaign that aims to drive in-store traffic and mobile revenue for its new Verismo products (see story).

This summer, Starbucks drove consumers to its locations to try out its latest bistro boxes via a new geotargeted mobile campaign. The ads ran within The Weather Channel’s iPhone application (see story).

Starbucks’ app generates a bar code that can be scanned at checkout to authenticate a mobile payment. This strategy has been gaining steam in the marketplace this year as other mobile payment solutions, such as NFC-enabled wallets, have been slower to experience uptake.

However, as more NFC-enabled phones are adopted by consumers this year and next, it is possible NFC-based mobile payments will appeal to more companies, possibly even Starbucks.

“NFC tap and go will inevitably be embraced by Starbucks,” Mr. Schwartz said. “NFC is ideal for high traffic, low-value transactions.

“Transit and Starbucks are poster children for contactless adoption,” he said. “As Starbucks advocates: pay faster, sip slower.”

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

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