Square’s International Starbucks Expansion Is Up To Jack Dorsey, Says Starbucks CEO

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The payments space was even further shaken up last night, with the news that Square will take over all U.S. credit and debit card transactions for Starbucks. And those who use the Pay with Square app (iPhone and Android) will be able to pay for their sugary caffeinated drinks with nothing more than their phone. This morning in New York, a handful of journalists sat down with Square CEO Jack Dorsey and Starbucks CEO Howard Schultz to discuss the “epic” partnership.

Before we get into the nitty gritty, it’s important to note the direct impact this partnership has on Square as a business and its plans for the future.

For now, it seems as though the partnership is mostly on the backend with Square handling all credit and debit card transactions in the U.S. But this could be the catalyst that propels Square onto the international scene. When asked what the $25 million in funding from Starbucks would do for the company, Dorsey mentioned that the company is still growing and hiring but that “recent funding will go towards international efforts.” Schultz added that it was up to Jack and Square to go international and possibly infiltrate Starbucks’ 18,000 stores in 60 countries.

“Over a million people a week are paying with their mobile device at Starbucks,” said Schultz. “Total transactions (mobile, credit card, cash) per week amount to about 60 million worldwide.”

Schultz suggested that about two percent of those transactions (1.2 million) are through mobile apps. He added that about 25 percent of its transactions are made through a Starbucks card and that Pay with Square will serve as another method of payment for now.

To be clear, geo-fencing and paying by name will not be rolled out at initial launch, but Dorsey says the two companies will be working “to advance that as fast as possible.” For now, barcodes will pop up on Pay with Square apps to complete transactions reducing any infrastructure change on the part of Starbucks. So no, you won’t be seeing any iPads with dongles at your local Starbucks anytime soon, or fewer cashiers/baristas. Neither company would comment on interchange fees.

This raises the question of how this partnership will help smaller merchants who already use Square. While Dorsey wouldn’t comment beyond discoverability through the Square Directory, the 7,000 Starbucks locations across the country certainly won’t hurt businesses who already use Square or are thinking about making the switch.

So when exactly will we begin seeing Square at Starbucks? Schultz says Square will begin popping up in stores nationwide before the holidays. For those of you who currently use the Starbucks app to reap rewards, you may want to stick with it, as loyalty programs between Starbucks and Pay with Square will remain separate for the time being.

It’s unclear how Starbucks will drive awareness (read: downloads) to the Pay with Square app, but Schultz added that the two companies would be “co-authoring” the effort. “Square will be present within the stores and suggestions to download it right now,” Dorsey told me. “This will help build general awareness of Square. More and more businesses will get on it and with one app, you’ll be able to interact with a huge portion of your city no matter where you live. We’ve seen adoption of Pay with Square in some unlikely places like the Midwest, not just metropolitan areas.”

Photo credit: @jack