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TheStreet Open House

Mobile Payments Are Fast, Baristas Are Furious

NEW YORK (TheStreet) -- There has been a lot of talk within the business world recently about mobile finance. As the world has become increasingly mobile, there has been a push by both consumers and companies to integrate their offerings into a mobile platform.

Mobile payments have caused a stir in particular over the last year. A number of retailers have started to allow customers the option to check out using their mobile device, maybe for convenience, or maybe as just a neat offering. I've covered the mobile financial space quite heavily this year with articles about Monitise (MONIF) and Green Dot (GDOT) as well as the underbanked population in general.

But while sitting in Starbucks a week ago working on a recent article, I started to think about the tips.

The little tip jars at my local Starbucks have been looking a little emptier recently. I started watching the transactions and I was able to confirm my suspicions. It appears that mobile payments, something Starbucks (SBUX) has truly pioneered, has started to take away from the tips of the baristas. No cash means no change, meaning nothing to put into the tip jar.

According to the very informal survey I conducted, not a single person using his or her mobile device for payment offered a tip to the employees. It makes sense: Most people in a place like Starbucks are in a rush in general, so why make the extra effort to add cash to a cashless transaction? I know since I downloaded the application the employees haven't been getting the leftover nickel from my $1.95 grande coffee transaction.

Today, 11% of the company's U.S. and Canada in-store transitions being paid for with a mobile device, CEO Howard Schultz said during the company's recent conference call. Moreover, management has said the company processes over four million mobile transactions per week with more than eight million customers using the mobile app. According to the fourth-quarter transcript, Schultz did hint at mobile tipping functionality in the future. However, he really didn't go into too much depth during the call.

Starbucks management has been extremely bullish when discussing its mobile application. Apparently the mobile focus has helped the company greatly with service times and dramatically increased customer engagement within its loyalty program.

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