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Why Square Coming to Starbucks Is a Big Deal (Update 2)

Updated from 10:53 a.m. EST to provide analyst comments regarding deal in the tenth paragraph.

NEW YORK ( TheStreet) -- The mobile payments industry went mainstream, as Starbucks (SBUX - Get Report) and Square signed a deal to bring Square's service to Starbucks 7,000 U.S. locations. This could change the shape of the payments industry forever.

The deal allows all Pay with Square users to find their closest Starbucks in the Square Directory using either their iPhone or Android device. Not only does Square get $25 million in a Series D financing ( reportedly valuing the company at $3.25 billion), but Starbucks CEO Howard Schultz is joining Square's board.

Square's CEO Jack Dorsey (who also co-founded Twitter), was notably excited about the deal.

"We're proud that Starbucks chose Square, as we share the value of always putting customers first," Dorsey said in the press release. "More than 2 million individuals and businesses can already use Square. This partnership will accelerate our ability to provide them with the tools they need to grow their business and thrive in today's economy."

The Digital Wallet's Future is Now

Companies like Google (GOOG), eBay (EBAY - Get Report) (via PayPal), Visa (V - Get Report) and MasterCard (MA - Get Report) have brought their offerings to the customer with varying degrees of success (PayPal being the most well-known). But this deal has a huge impact on the industry,said Brian Sozzi, chief equities analyst at NBG Productions and Real Money contributor. "I think it's [Starbucks] trying to localize themselves. It's a great thing to be able to pay with the thing in your pocket. This transforms the industry."
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