* Starbucks to use Square for all debit/credit card payments
* Starbucks to invest $25 million in Square
* Schultz joins Square's board
By Gerry Shih and Lisa Baertlein
SAN FRANCISCO, Aug 7 Starbucks Corp
plans to switch its processing of debit and credit card payments
to mobile payments start-up Square Inc, the two companies said
Tuesday, in a deal will help establish two-year-old Square as a
bona fide player in the industry.
As part of the deal, the world's biggest coffee chain will
invest $25 million into Square, the San Francisco-based company
led by Jack Dorsey, co-founder of social media company Twitter
The alliance comes at a time when Square is facing
increasingly stiff competition from rivals like eBay Inc
and Intuit Inc, which offer their own mobile
payment processing tools.
Starbucks Chief Executive Howard Schultz, who will join
Square's board, said the tie-up would lower payment processing
fees at the coffee chain's almost 7,000 company-owned shops in
the United States.
He declined to say which payment processor Square was
displacing or how much the company would save.
"Hopefully the Starbucks partnership with Square is a
catalyst for new businesses signing up with Square because in a
sense we will validate with great confidence Square's position
in the marketplace versus others," Schultz said in a joint
interview with Dorsey.
In its quest for small business clients who do not currently
accept credit cards, Square typically touts its flat, 2.75
percent-per-transaction fee as a simple alternative to the
various fees that some payment processors charge.
The company has grown swiftly, saying in June that it was
processing more than $6 billion a year in payments.
Dorsey declined to disclose the rate that Square extended to
Starbucks, which rang up more than $8 billion in U.S. sales
through 6,705 company-operated and 4,082 licensed shops in
"Obviously, as you scale up you do see reductions in cost
and Starbucks is a very significant scale compared to a lot of
other merchants in the world," Dorsey said.
At least initially, consumers will not notice anything
different about how a barista swipes their cards, but Starbucks
plans to roll out other Square products, including one that
allows stores to sense when a user has walked in the door, and
accept payments simply by taking the user's name.
Starbucks has been a successful early adopter of technology
ranging from mobile payment options to social media marketing
tools like Facebook and Twitter.
In early 2011, it released a mobile phone app that lets
users load money onto their smartphones, which is then scanned
to pay for drinks at the cash register. It now boasts more than
1 million mobile transactions a week in the United States.