NEW YORK - Customers coming into your store daily, or as many as three times a day, would probably find value in a mobile app. At least that€™s what Starbucks has learned.
Bloomberg€™s BusinessWeek writes that Starbucks first introduced a mobile app in 2009, which offered information on its coffee blends and nutritional information. In January 2011, the company released its Starbucks Card Mobile App, which allows consumers to turn their smartphone into a payment device, where a scanner at the register captures a bar code from the screen of their mobile phone. Customers link and load their Starbucks€™s digital prepaid card with an existing credit card.
For customers like Penn State student Sarah Espinoza, who frequents Starbucks up to three times a day, paying with her mobile device is securing her loyalty: "They [Starbucks] send me daily specials, and that makes me want to run to Starbucks," she told the news source.
Starbucks€™ mobile payment program is probably the largest of any retailer in North America. Even before its recent $25 million investment in Square, notes the news source, the company had been processing 1 million mobile-phone transactions per week. "What mobile payments allows is an unprecedented relationship between us and our customer," said Adam Brotman, Starbucks€™s chief digital officer.
By allowing its customers make purchases via their smartphones using Square technology, Starbucks is also paying less in credit card transaction fees and processing Starbucks payments at a lower rate than some other payment networks.
"Everyone is learning from Starbucks," Drew Sievers, CEO of mobile payment startup mFoundry, which helped build the Starbucks app, told the news source. His company is now working on software for up to nine merchants.
More than a dozen retailers, including Target, Best Buy and Walmart, teamed up to create a own mobile payment app in hopes of being able to compete with the likes of Google, EBay€™s PayPal and ISIS, writes the news source. Analysts say that retailers may also try to "get established financial companies to lower their swipe fees."
By selling through the mobile app, "you can cut transaction fees roughly in half," Jim Dion of retail consultancy Dionco, told the news source, adding: "If you have $100 million in sales a day, that€™s an extra $1 million."
The likelihood, however, that one company, retailer or financial institution could dominate the mobile payments landscape is questionable.
"There€™s not going to be a single mobile wallet solution," Jim Stapleton, chief sales officer at ISIS, told the news source. "Retailers are going to have to support a number of them."
For more on the future of the mobile payments landscape, see the May 2012 cover story of NACS Magazine: "Exposing the Mobile Wallet."