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"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

"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 ago
  Yes. 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 ago
    I 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 ago
      2/3 is kind of a vast majority; it means twice as many people are paying with cards than not.
- robryan 14y ago
  To 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 ago
    Starbucks don't.
  - Simucal 14y ago
    I've read before[0] that it is actually a violation of a stores terms with Visa to enforce minimum transaction sizes. Those stores could potentially be reported to Visa and have sanctions placed on them (like an increased transaction rate). Interestingly, a merchant is allowed to offer a discount to people who pay by cash but they can't charge more for people paying by credit card. [0] - http://www.msnbc.msn.com/id/11697094/ns/business-consumer_news/t/surprise-stores-cant-set-credit-card-minimum/#.UCJi8E1lSAI http://www.msnbc.msn.com/id/11697094/ns/business-consumer_ne...
    - ben1040 14y ago
      After the credit card reform act went through in 2010, the card companies now allow for a $10 minimum. http://consumerist.com/2010/09/amex-visa-mastercard-all-give-thumbs-up-to-10-credit-card-minimums.html http://consumerist.com/2010/09/amex-visa-mastercard-all-give...
      - robryan 14y ago
        Yeah it is annoying really. Especially for anywhere where it is common to buy things under $10. I think in the end most businesses would be better off just taking the fee hit as they would likely see increased business.
- stonemetal 14y ago
  My wife actually thinks it is rude to pay with cash or check when people are waiting behind you in line. Cards are the fastest way to pay, you don't even have to sign for purchases under a certain amount.
  - seabee 14y ago
    You don't enter a PIN? That process easily makes it take longer than cash.
    - clamps123 14y ago
      What? Perhaps if you have down syndrome, but otherwise takes around 5 seconds. Swipe card, enter 4 digit pin, press enter. Faster than it would take the cashier to type in the amount you just gave him, much less make change.
      - untog 14y ago
        Down Syndrome? Really? In any case, plenty of people do struggle with it- the old especially. But that's not the biggest factor. With a swipe everything is done by one person- the cashier. PIN entry requires a back and forth between customer and cashier, and I've seen plenty of cashiers not notice that the PIN entry has gone through, etc.
    - dmd 14y ago
      No PINs for credit cards in the US.
    - teamonkey 14y ago
      Not for coffee-sized amounts at major coffee chains, no.
    - stonemetal 14y ago
      Debit cards require a pin, but credit card transactions less than some amount(I think it is $10) don't require anything other than the swipe.
salman89 14y ago
Will 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 ago
  I'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 ago
    Sorry, should have clarified. I meant the transaction fees that Square pays.
philip1209 14y ago
Your 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 ago
Question 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 ago
  I'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 ago
    But they are taking over all CC processing. Only a very small percentage of transactions will be made through the Square app.
- encoderer 14y ago
  Businesses 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)
  - andyakb 14y ago
    ...right, so why cant starbucks negotiate with banks, much like mcdonalds does?
    - notatoad 14y ago
      because the parent is wrong, McDs doesn't negotiate with the banks either. they negotiate with a payment gateway provider. which is what Square is.
kayoone 14y ago
Here 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 ago
  Norway: Cards for everything. There's no cost associated. Plus your bank card is also your ID. Chip & PIN.
  - te_chris 14y ago
    Same in NZ. I buy 1.50 lolly purchases from the dairy on my EFTPOS card. (No transaction cost).
- colincsl 14y ago
  I'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 ago
    Here 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 ago
That 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 ago
This 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.

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 ago
Yes. 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 ago
  I 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 ago
    2/3 is kind of a vast majority; it means twice as many people are paying with cards than not.
robryan 14y ago
To 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 ago
  Starbucks don't.
- Simucal 14y ago
  I've read before[0] that it is actually a violation of a stores terms with Visa to enforce minimum transaction sizes. Those stores could potentially be reported to Visa and have sanctions placed on them (like an increased transaction rate). Interestingly, a merchant is allowed to offer a discount to people who pay by cash but they can't charge more for people paying by credit card. [0] - http://www.msnbc.msn.com/id/11697094/ns/business-consumer_news/t/surprise-stores-cant-set-credit-card-minimum/#.UCJi8E1lSAI http://www.msnbc.msn.com/id/11697094/ns/business-consumer_ne...
  - ben1040 14y ago
    After the credit card reform act went through in 2010, the card companies now allow for a $10 minimum. http://consumerist.com/2010/09/amex-visa-mastercard-all-give-thumbs-up-to-10-credit-card-minimums.html http://consumerist.com/2010/09/amex-visa-mastercard-all-give...
    - robryan 14y ago
      Yeah it is annoying really. Especially for anywhere where it is common to buy things under $10. I think in the end most businesses would be better off just taking the fee hit as they would likely see increased business.
stonemetal 14y ago
My wife actually thinks it is rude to pay with cash or check when people are waiting behind you in line. Cards are the fastest way to pay, you don't even have to sign for purchases under a certain amount.
- seabee 14y ago
  You don't enter a PIN? That process easily makes it take longer than cash.
  - clamps123 14y ago
    What? Perhaps if you have down syndrome, but otherwise takes around 5 seconds. Swipe card, enter 4 digit pin, press enter. Faster than it would take the cashier to type in the amount you just gave him, much less make change.
    - untog 14y ago
      Down Syndrome? Really? In any case, plenty of people do struggle with it- the old especially. But that's not the biggest factor. With a swipe everything is done by one person- the cashier. PIN entry requires a back and forth between customer and cashier, and I've seen plenty of cashiers not notice that the PIN entry has gone through, etc.
  - dmd 14y ago
    No PINs for credit cards in the US.
  - teamonkey 14y ago
    Not for coffee-sized amounts at major coffee chains, no.
  - stonemetal 14y ago
    Debit cards require a pin, but credit card transactions less than some amount(I think it is $10) don't require anything other than the swipe.

salman89 14y ago

Will 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 ago
I'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 ago
  Sorry, should have clarified. I meant the transaction fees that Square pays.

philip1209 14y ago

Your 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 ago

Question 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 ago
I'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 ago
  But they are taking over all CC processing. Only a very small percentage of transactions will be made through the Square app.
encoderer 14y ago
Businesses 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)
- andyakb 14y ago
  ...right, so why cant starbucks negotiate with banks, much like mcdonalds does?
  - notatoad 14y ago
    because the parent is wrong, McDs doesn't negotiate with the banks either. they negotiate with a payment gateway provider. which is what Square is.

kayoone 14y ago

Here 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 ago
Norway: Cards for everything. There's no cost associated. Plus your bank card is also your ID. Chip & PIN.
- te_chris 14y ago
  Same in NZ. I buy 1.50 lolly purchases from the dairy on my EFTPOS card. (No transaction cost).
colincsl 14y ago
I'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 ago
  Here 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 ago

That 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 ago

This 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.