This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

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

Starbucks did $3.3 billion in revenue in the third quarter, with a healthy portion of those transactions being credit and debit-card sales. Starbucks does not break down the percentage of payments.

Starbucks has been at the forefront of the mobile payment revolution with its own mobile payment app, but this puts the mobile payments industry on another level. "Starbucks has scale with ~7,000 U.S. stores (~4,000 licensed), and the partnership will likely be a key reference case for awareness of mobile retailing," JPMorgan wrote in a research note discussing the deal.

According to data from Ernst & Young, mobile payments are expected to be big business, with the market reaching a massive $245 billion by 2014. This deal with Starbucks puts Square in a position to capture a significant portion of that market, as the shift in payment methods continues to move away from credit cards, debit cards and cash to smartphones, tablets and other mobile devices.

This deal might even impact Apple (AAPL - Get Report), which announced its Passbook app at its Worldwide Developer Conference earlier this year, showcasing Starbucks as part of the presentation. An Apple spokesman could not be immediately reached for comment.

Morgan Stanley analyst Glenn Fodor opines that this deal has a wide scope of companies it might affect, with most of the reaction being "mixed", "negative," or "mixed to negative," including PayPal, which is currently in the Starbucks mobile app. "This could have been a great partnership for PayPal/PayPal Here," Fodor wrote in the report. However, he does mention that it would take a while for for Square to take a "PayPal-like 'ach'" strategy (ACH stands for automated clearing house.)

"Furthermore, if PayPal's experience is any indication, it takes a long time to transition consumers off the 'rewards-oriented' rails of traditional networks," Fodor noted.

In an email obtained by TechCrunch, Dorsey wrote, "By embracing Square, Starbucks has validated these ideas as powerful tools -- not just for small businesses, but for smart businesses."

With this deal, the mobile payments industry might be coming to a consensus on how it is used, Sterne Agee analyst Greg Smith wrote in a recent research report. He said "the payment itself is becoming commoditized; it is therefore the functionality you wrap around the payment or embed in the mobile wallet that will differentiate the winners from the losers."

It looks like Square and Starbucks are poised to be in the winners column.

Interested in more on Starbucks? See TheStreet Ratings' report card for this stock.

Check out our new tech blog, Tech Trends. Follow TheStreet Tech on your wireless devices.

-- Written by Chris Ciaccia in New York

>Contact by Email.

2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $117.81 0.00%
EBAY $29.10 0.00%
MA $98.67 0.00%
SBUX $62.18 0.00%
V $79.84 0.00%


Chart of I:DJI
DOW 17,798.49 -14.90 -0.08%
S&P 500 2,090.11 +1.24 0.06%
NASDAQ 5,127.5250 +11.3820 0.22%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs