The world of mobile payments just got turned upside down. I think every startup has been wishing for this news to happen to them–it’s quite frankly a game-changer and can potentially put a lot of people out of business or at least rethinking their strategy. Okay, so what is everyone talking about right now? Probably that coffee giant, Starbucks, has just placed their bets on mobile payment service Square–so much so, that they’ve announced they’re going to invest $25 million in the startup’s latest round of funding.
Square has been in the news quite a bit lately and pretty much has become the media darling that everyone is talking about and wants to use. From recently announcing that they’ve processed over $6 billion in payments annually to securing deals with name brands like Staples, Target, Walgreens, and FedEx Office stores to distribute those iconic credit card readers, this mobile payment company has really hit the ground running hard and has become quite synonymous with pay-by-phone.
And it’s become quite a boon for its founder, Jack Dorsey, who just so happens to also be a co-founder of microblogging powerhouse service, Twitter. And it can’t be that easy for the guy, either. I mean, he’s probably as well-known for his work schedule as he is being the founder of two of the hottest tech startups in the industry. But he does it and it’s certainly showing. After all, he’s the entrepreneur who found a way to disrupt the payment system in a way that the average person and small business can easily adapt and handle mobile transactions to help keep them in business and still pay a lower percentage fee compared to all the other traditional card readers.
For the past couple of years, the only inkling we’ve heard about Square, at least here in the Valley, has been through people clamoring on Twitter that they’ve received a free card reader and many are for food trucks, street vendors, and other types of businesses who just don’t see the need to pay the hundreds, if not thousands, of dollars per month to have a way to process credit card payments. And after all, if you’re a all-cash business, you’ll probably do much less business than if you accepted credit cards. Square is enabling the furtherance of commerce and isn’t letting a recession stop it from helping people get what they want.
As the Motley Fool notes in a recent opinion piece on Mr. Dorsey, since Square introduced the square card reader, they’ve since adapted with growing technology to help further handle payments, including developing Square Register, an application that will turn your iPad into a credit card register for small businesses and Pay With Square, an app for customers to use. This is probably one of the things that has separated Square’s success from other mobile payment companies like VeriFone Systems, Google Wallet, and probably even PayPal Here. In that same Motley Fool piece, it states that Square’s head of strategic planning and analysis, Steve De Wald, doesn’t even consider PayPal as a competitor to it. Why? Because they’re apparently focusing more on the strategic relationship with the merchant customer and cutting out the middleman. It’s not about being in control, but rather giving control back to the merchants.
Today’s news is probably the biggest news to hit Square in a long time. Sure, they’ve had the distribution chain set up correctly, but what they didn’t have was mainstream adoption. Remember how I mentioned that most of their customers were probably individuals or small-to-medium sized businesses? Well now, they’ve hit the big time and have gone mainstream. Today, beverage giant Starbucks announced that it’s going to implement Square into its stores and allow people to pay using the service. This must have been a big win for Square–not only does Starbucks love Square that they’re using it in their 7,000 stores across the United States, but they are banking big on it and have sunk in $25 million to make it work. In a letter announcing the deal, Mr. Dorsey stated:
Square began with a really simple idea: everyone should be able to accept credit cards. It should be easy and free to get set up, it should use simple technology people already own, and, most importantly, it should instantly adapt to any size business—from the person chasing a dream to the largest organization on the planet. By embracing Square, Starbucks has validated these ideas as powerful tools—not just for small businesses, but for smart businesses.
As part of this deal, it’s being reported that Starbucks will be integrating itself with the Square directory so that you’re going to be able to find one of the 7,000 outlets in order to get yourself a drink. The Square directory is available only through the app itself and this could potentially bode well for other Square-enabled companies who find themselves being distanced from this latest move. But as customers become even more acclimated with the service, they’ll grow more fond of it and be more eager to do business with those that have it. Makes sense, right?
Want to know the deals of the partnership? The Next Web points them out for us…and in case you were wondering, this deal is only available here in the United States:
Customers will be able to use Pay with Square, Square’s payer application, from participating company operated U.S. Starbucks stores later this fall, and find nearby Starbucks locations within Square Directory;
Square will process Starbucks U.S. credit and debit card transactions, which will significantly expand Square’s scale and accelerate the benefits to businesses on the Square platform, especially small businesses, while reducing Starbucks’ payment processing costs;
Overall this has been an incredible year thus far for Mr. Dorsey and Square. I’m wondering what else we’re going to be seeing from them in the next few months of 2012…most likely even greater things.
Photo posted by Jack Dorsey via Twitter: Square founder Jack Dorsey with Starbuck’s CEO Howard Schultz agreeing on the partnership