Starbucks Extends Mobile Payments to Nearly 300 More Stores

In the biggest expansion yet of mobile payments to its standalone stores, Starbucks Coffee Co. on Monday said it has equipped almost 300 company-owned stores in New York City and parts of Long Island to accept transactions using 2-D bar code technology. This expansion follows the Seattle-based coffee chain’s move this spring to install the technology in outlets located within more than 1,000 Target Corp. stores (Digital Transactions News, April 8). Starbucks started its mobile-payments pilot 13 months ago at 16 standalone stores, eight in Seattle and eight in California’s Silicon Valley.

While the chain will not release usage results so far, it is apparently pleased with how the test is going. “Our mobile-payment trial to date has exceeded our expectations and the [New York City] and Long Island expansion builds on this success,” says a Starbucks spokesperson in an e-mail to Digital Transactions News. “They clearly are having results that they like,” adds Todd Ablowitz, president of Double Diamond Group, a consulting firm in Centennial, Colo. The latest move on the East Coast, he says, is “a big step forward for mobile payments.”

Starbucks’s choice of stores in New York and in Nassau and Suffolk counties on Long Island stemmed largely from the fact that New Yorkers tend to be heavy coffee drinkers as well as people who lead an on-the-go lifestyle to which handset-based payments are well-suited, the spokesperson says. “Mobile payment is the fastest way to pay and our customers have asked us to increase the number of locations with mobile payment,” the spokesperson notes.

The chain’s free Starbucks Card Mobile app, which works with the iPhone, iPod touch, and various BlackBerry models, allows customers to make payments against a proprietary prepaid card. (Users will be able to reload their Starbucks cards from their PayPal accounts using the Starbucks Card Mobile app and a new two-click Mobile Express Checkout feature PayPal Inc. announced on Tuesday).

While the company won’t give mobile numbers, it says almost 20% of all transactions now are linked to the card. Moreover, it projects its customers will load more than $1 billion on their cards this year, with reload volume at the end of the third quarter up 59% over the same time in 2009.

The Starbucks Card Mobile app–which functions as a mobile wallet and also allows customers to reload their balance against a credit card, check on rewards points, and find nearby stores–displays a bar code at checkout that can be read by a device linked to the cash register. In this way, the technology works as a sort of alternative to near-field communication (NFC) for handset-based point-of-sale payments. NFC, which relies on embedded chips in mobile phones that can access e-wallets, has been hobbled by disputes between carriers and card networks and by a near-total absence of NFC-enabled phones. Ablowitz says Starbucks’s latest expansion could help position it for eventual NFC adoption. “If you can build a user base you’re ahead of the game” for when NFC arrives, he says.

For now, Starbucks says it has no intention to start charging for its downloadable app, which was developed by Larkspur, Calf.-based mFoundry Inc., a mobile-technology company. And a version that works with phones running Google Inc.’s Android operating system could be in the offing. “Our customers on My Starbucks Idea [a discussion board] are asking for it to be the next platform we support for the Starbucks Card Mobile app,” says the spokesperson. The chain started with iPhones and BlackBerrys because research shows some 71% of customers who carry smart phones have these devices, the company says.