The Secret Sauce In Square's Starbucks Partnership: Discovery, QR Codes

The mobile-payments company is turning its Starbucks partnership into a discovery tool--for patrons of the coffee chain and businesses located nearby.

Square, the mobile-payments service popular among baristas and food truck owners, is getting a big jolt from its biggest merchant partner yet: Starbucks.

Starting today, the coffeehouse chain will now accept Square Wallet, Square's mobile app, which will let customers pay for Venti espressos via iPhone or Android device. Part of an ongoing partnership between Square and Starbucks, which the companies announced in August, the collaboration will help to streamline Starbucks' payment process while bringing more visibility to Square's service and local merchants. Starbucks, which will integrate Square's system at 7,000 US locations, has already seen more than 100 million mobile transactions from US customers since introducing similar payments platforms--a pool Square cofounder Jack Dorsey is clearly interested in tapping into.

Before, in order to pay at Starbucks, customers could use cash, card, or a variety of Starbucks' reward services. These platforms enabled customers to buy items via loyalty card or smartphone app, but they also required users to monitor and top-up their balances. Now, since Square Wallet is linked directly to debit or credit cards, customers no longer have to reload their Starbucks balances. Square's solution also eliminates the need for paper receipts, keeping track of them digitally within the app. To pay at Starbucks, customers simply need to open the Wallet app and scan their QR code at the counter--no need for cash or cards to change hands.


Of course, the QR code system is a departure for Square, which is known for accepting payments via a small, white smartphone or tablet card-reader. The startup has also pushed a service that removes most all of the friction from the payments process and allows customers to buy items essentially by saying their names. Neither solution is currently available at Starbucks. So while we shouldn't expect to start paying via iPads at Starbucks anytime soon, the QR code solution will at least help Square scale its service and will no doubt bring significant attention to its Wallet app.

It's also likely to bring significant attention to Square's merchant partners. After paying with Square Wallet, the service will suggest nearby businesses that also accept the payment solution. So, for example, after I recently purchased an item via Square at Starbucks, the Wallet app suggested that I might enjoy a local cupcake store just around the corner. The app can not only be used to find nearby Starbucks locations but other merchants in the neighborhood; even the Starbucks Digital Network, the web service you see when taking advantage of Starbucks' Wi-Fi, will feature local Square-accepting businesses in the area. Starbucks will now basically act as a hub for local merchant discovery.

And that's ultimately Square's aim. As Jack Dorsey told Fast Company in August, “It’s not just the product that you end up drinking, but it’s how it’s served. It’s the experience walking into the store, walking out of the store, and everything around the store.”

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