Starbucks Mobile App Does Good Business, But When Will They Double Down?

It may still be a feature phone world, and mobile payments are a work in progress, but the big movers in the space are happy to be the guinea pigs, knowing it will pay off down the line. Starbucks has been doing the mobile payment thing for a good two years now, and the app has grown from a simple gift card frontend for the iPhone to a more versatile product, and gone from select locations to over 9000.

Their mobile app payments total 26 million now, accelerating to a current rate of around 3 million per month. It has to be pointed out that the payment count growth isn’t quite in line with the geographic and location growth, but that’s expected, since the geographic expansion is a prerequisite for customer participation. That people want to use the system is clear: but will Starbucks continue as a lone-wolf payment brand or align itself with a more universal payment system like Google Wallet?

They shouldn’t feel any pressure, of course. As one of the world’s best-known brands and with a service style that lends itself to a standalone app, they’re in a good position to keep things the way they are. A smaller company, say one of the local roasteries here in Seattle, doesn’t have that option, and although their decision to go with, say, Square, won’t have much of an effect on Starbucks, a thousand local businesses doing so might cause them some thought.

It should cause Starbucks thought especially, I should say, because their recent brand backpedaling following an overeager expansion saw them desperately trying to rekindle local relationships. But any large company must consider what their customers expect when they walk in the door. If every place on the street takes credit cards and only one takes cash, there’s pressure on them to add that capability. And if a company projects that in five years, customers will be expecting Google wallet, NFC, Isis, or what have you, they’ll want to board that ship early.

Right now, with this mobile app, Starbucks is in a holding pattern. It’s doing all right, but the mobile app has accounted for only $110 million in card cash transfers, a microscopic portion of the $2.4 billion in gift card transactions. There’s a lot of room for growth, but it’s not going to happen in this app.

Watching how the big retail companies dispose their favor among the competing payment systems will make for great spectating in the next few years. Gap versus H&M, Burger King versus McDonalds, and so on. Like it or not, the success of our favored disruptive technologies will rely very much on the blessing of billion-dollar companies. You may like Square, but if MasterCard and Visa make it easier for their hundreds of millions of customers to use Isis, it’s game over.

In the meantime, it’s more natural to see small payment systems installed in small businesses, where they can build up an resistance to bullying and, hopefully, become too large a system to be shut out without concessions by the majors. Starbucks will certainly be one of the big voices in the debate to come; with sovereign sway over so very many daily transactions worldwide, they are potentially both crucible and kingmaker.