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This announcement makes me happy, for Square and Jack Dorsey as a young business leader. I love everything about the business idea, execution, design and tone o
by faramarz 14y ago
This announcement makes me happy, for Square and Jack Dorsey as a young business leader. I love everything about the business idea, execution, design and tone of the overall strategy.
Noteworthy points from the press release
The partnership terms include:
- 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;
- Using Square Directory, Starbucks customers will be able to discover local
Square businesses -- from specialty retailers to crafts businesses -- from
within a variety of Starbucks digital platforms, including the Starbucks
Digital Network and eventually the Starbucks mobile payment application;
- Starbucks will invest $25 million in Square as part of the company’s Series D
financing round;
- Starbucks chairman, president and ceo Howard Schultz will join Square’s
Board of Directors.
https://squareup.com//news/releases/2012/square-starbucks https://squareup.com//news/releases/2012/square-starbucks
- philip1209 14y agoAlso, this is a big win for Jim McKelvey. (disclosure: I am a WashU student and Cultivation Capital intern)
- jevinskie 14y ago"Square will process Starbucks U.S. credit and debit card transactions": Wikipedia says that Starbucks has $11.7 billion in revenue every year. I would assume that a majority of that revenue is through a card. I am not familiar with Square's revenue but I feel that this will at least double their transactions. Am I correct?
- deleted 14y ago[deleted]
- bigiain 14y ago"I would assume that a majority of that revenue is through a card." Really? I almost never use a card for café type purchases. Maybe if I were buying a meal, but for a coffee or two I'm 99% likely to use cash. (Note: mine is an Australia-centric view, perhaps things really are very different in the USA?)
- jcdavis 14y agoYes. The vast majority of payments I see in Starbucks in the US are via credit cards (or debit cards). With modern PoS systems, paying via card is faster and more convenient than cash, not to mention other benefits (rewards on cards, being able to better track spending)
- jimmytucson 14y agoI used to work at Starbucks (albeit going on 5 years ago) and although I don't have the exact statistics or a perfect memory, it was not a "vast majority". If I had to guess, I'd say probably something like 2/3. Maybe the ratio increases if you count Starbucks gift cards. Either way you look at it, Square's transaction volume surges with this deal. Good on both parties.
- zevyoura 14y ago2/3 is kind of a vast majority; it means twice as many people are paying with cards than not.
- robryan 14y agoTo add to this, often cafes enforce a minimum transaction size, such as $10, to use card. This means usually you only use card it you are grabbing lunch as well.
- georgespencer 14y agoStarbucks don't.
- 14y ago
- salman89 14y agoWill have an impact also in terms of economies of scale. Their transaction fees _should_ go down as they process a larger number of transactions. Makes the partnership much more strategic, and it makes sense why Starbucks also invested - might have been part of the package.
- jeaguilar 14y agoI'm having a hard time seeing how Starbucks has higher processing costs than Square. I think that Starbucks will continue to pay their low costs and be able to use Square as their platform. No reason Square couldn't process Starbucks transactions, too without needing to change their merchant accounts.
- salman89 14y agoSorry, should have clarified. I meant the transaction fees that Square pays.
- philip1209 14y agoYour first stated assumption is correct, but do not assume that all of Starbucks credit card transactions are processed through Square. Thus, the second assumption is not linear.
- raverbashing 14y agoQuestion How does SB gets smaller fees through Square than negotiating directly with card providers? How do card providers allow Square to sell their services cheaper than themselves? And Square, you sure have a nice business, but the magnetic stripe is very insecure.
- shalmanese 14y agoI'm guessing that they are going to try and get significantly lower fraud rates from pay with square (since it's a photo verification and not an insecure card strip) which can help push down rates. They can afford to break even on the conventional credit card side of the business if they can make their margins on Pay with Square.
- jonknee 14y agoBut they are taking over all CC processing. Only a very small percentage of transactions will be made through the Square app.
- encoderer 14y agoBusinesses don't get to negotiate with Visa and Mastercard. They negotiate with banks. And banks negotiate with large volume customers. That's why McDonald's can afford to take credit for a $1 ice cream cone without losing 33% of it to the card company. Square has a lot of options in the way they process transactions, and they have a very high volume (now more so than ever)
- kayoone 14y agoHere in Europe (Germany) i have never seen anyone buying a coffee with a credit card. Maybe debit card, but that also is rare, its mostly cash for these small transactions. Most coffee shops dont even take any cards at all, even here in germany!
- gyaresu 14y agoNorway: Cards for everything. There's no cost associated. Plus your bank card is also your ID. Chip & PIN.
- te_chris 14y agoSame in NZ. I buy 1.50 lolly purchases from the dairy on my EFTPOS card. (No transaction cost).
- colincsl 14y agoI'm living in Germany for the summer and am surprised at how little people use cards here compared to the in the states. I love being able to use a debit/credit card so that everything I buy is logged. That means I can see everything (automatically tagged) using Mint. It also decreases the hassel of carrying as much cash around and going to the ATM as often. On a tangent, it seems like people here have more of a negative view on credit cards - as if they assume you only use one if you can't actually pay. As long as you pay off your bill each month there is no real downside for the customer.
- ivancdg 14y agoHere in France, people use debit/credit cards to buy EVERYTHING. Some merchants discourage this by insisting on a 15 euro minimum charge. But by and large cards are used more often than cash. In restaurants it is common to split the payment of the meal and have each person contribute via a card. It's been that way for years, although the frequency of card use is not as overwhelming as in the US. At the supermarket, if I buy a bottle of water (0,18) I pay with a credit card. The majority of people do the same thing. Caveat: many people, especially free-lancers, are paid in cash to avoid paying taxes on part of their income. Those people pay cash for everything. The give-away is the use of big bills (50, 100 euro bills) for small purchases.
- nchlswu 14y agoThat seems like a reasonable assumption. A lot of posters are forgetting that significant portion of Starbucks revenue isn't from beverages at the till. Starbucks sells a lot of coffee related goods and processes a lot of revenue for gift cards and their mobile payment app which they've had for quite a while (Apple recognized in iOS6 Cards). I'm very curious if Square is going to handle all transactions that aren't at the physical point of sale. My gut feeling is that a big chunk of credit and debit revenue is for gift cards and gift card refills and that could impact your estimate.
- ranvir 14y agoThis sounds like a huge coup for Square. And a little surprising that they could actually (or already) provide card processing at a better rate than Starbucks could negotiate on its own.
- gootik 14y agoWhile I'm happy for Square, I'm saddened that Starbucks gets special treatment. Why is Starbucks (a well known brand) getting a personal post written by Jack, when Square's "goal" is to promote and help small businesses? Maybe a more subtle way of informing the world about this partnership was better.
- hboon 14y agoThey want to be loud because having Starbucks on board both as a customer and investor is a strong vote of confidence for Square. They want prospective customers and existing customers to know that.
- sophacles 14y agoRight - And as a potential customer, I now think: "Oh, square has Starbucks' processing, they probably won't go out of business under me, so I can have one less worry".
- riams 14y agoIt's not a zero sum game. As more mainstream consumers learn about and start using Square, it will undoubtedly give a great boost to small businesses using Square as well.
- stock_toaster 14y ago> Why is Starbucks (a well known brand) getting a personal post written by Jack, when Square's "goal" is to promote and help small businesses? Maybe the 25 million Starbucks invested in Square?
- cschep 14y agoMeant to up vote on mobile and hit down instead, sorry. Someone balance it for me?
- philip1209 14y agoSquare just finished a round of venture funding, but by getting Starbucks as a long-term client means they have a consistent revenue against which they can secure credit, i.e. the owners do not need to further dilute their shares to obtain funding if they can prove to banks that they have income, thus making it easier to secure a loan.
- timjahn 14y ago" - Starbucks will invest $25 million in Square as part of the company’s Series D financing round;" Wait, what? Is this Starbucks buying a slice of the decision making process to ensure things are generally in their favor?
- mattmaroon 14y agoSure. Companies often invest in other companies. Google Ventures is an example of this. Microsoft invested in Facebook then promptly integrated connect into Bing, Xbox Live and Outlook.com (with probably more to come). Starbucks can benefit from the Square deal, invest in them, and help promote them all at the same time. Actually pretty brilliant.
- frisco 14y agoQuick clarification on Google Ventures: Microsoft in Facebook or Starbuck in Square are those companies acting as "strategic" investors. Google Ventures is different in that it's a venture investor: it tries to be completely separate from Google proper and doesn't necessarily come with any close business relationship between the investments and Google. People can argue over whether it can actually achieve this separation, but it's run in a completely different way from ordinary corporate VC (which is usually managed by business development inside the parent company).
- dclowd9901 14y agoIt occurs to me that, with Square as a partner, Starbucks stands to gain a lot from the partnership. If you think that most of their transactions are in small amounts (under $7 generally), and most of those transactions are done by credit card (I'm making a presumption about affluent individuals' purchase patterns), is it possible they're trying to turn the price they'd normally pay for transactions into investment capital? They were pushing those Starbucks refill cards like crazy a while back..
- alanh 14y agoIt’s also currently hard (impossible?) to add a tip to Starbucks credit card orders. (I assume this is done to minimize time spent on each customer.) Square makes it ridiculously easy.