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Starbucks says 1 in 6 payments already mobile

Martyn Williams | Nov. 3, 2014
The company said it accounted for 90 percent of mobile payments in the US last year.

StarbucksThe company that embedded wildly expensive coffee into your life now wants to make it fast, easy and nearly thoughtless to pay for it. For example, working with Square, Starbucks can turn your phone into a wallet that even tracks digital receipts (though we may not really want to know just how much we spend on latte and foam). Starbucks also launched what turned into the biggest LivingSocial promotion to date, selling 1.5 million gift cards in one day. Customers could also link the gift card to their loyalty card and keep on sippin'. Starbucks wants to be a "pioneer," says chief digital officer Adam Brotman, in blurring lines between technology, marketing and customer experience.

Starbucks says mobile payments are taking off in a big way and it's already handling almost 7 million a week at its U.S. coffee shops.

That accounts for 16 percent of all transactions at its stores and, the company says, meant it transacted 90 percent of all of mobile payments in the entire U.S. in 2013.

The company's slice of the national mobile payments market is sure to dip in the years ahead as other retailers start catching up to Starbucks, in part thanks to the recent launch of Apple Pay, but Starbucks says it sees no slow down in consumer adoption of its mobile payments technology.

Starbucks has integrated payments into its its own app, which allows customers to keep a prepaid Starbucks card on their phone, enabled with automatic refills when it gets low on cash, and keep a list of favorite drinks to make ordering easier.

Starbucks has apps for both Apple iOS and Android devices. On iOS, the prepaid Starbucks card is integrated with the phone's Passbook digital wallet app.

"What you're going to see in the years ahead will be a rapid acceleration in mobile device purchases and a continued significant migration away from bricks-and-mortar commerce," said Howard Schultz, CEO of Starbucks, in a conference call with investors Thursday.

Schultz said mobile users represented "a huge prize" for retailers and financial services companies and that's why there is so much interest in the sector.

"That's why every tech and financial service company in the world is today chasing the mobile payment opportunity," he said. But he said that while Starbucks doesn't have the hardware and software expertise of competitors, it has managed to do something that its competitors, so far, haven't: change consumer behavior.

"We've accomplished this by integrating the convenience of mobile payment to a compelling and enjoyable program that gives our customers rewards," he said.

Starbucks is seeing growth of 50 percent a year in mobile payments and looking ahead, Schultz said, "the real growth is yet to come."


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