Square Will End Payment-Processing Agreement With Starbucks

Square disclosed Wednesday in its IPO filing that it will discontinue its payment processing agreement with Starbucks.

The partnership, which formed in 2012, began to unravel last year when Starbucks stopped accepting payments from mobile devices running Square Order. But until August 2015, Square continued to process all transactions paid with credit and debit cards.

As of October 1, Square’s exclusivity provision with Starbucks was eliminated, and Starbucks began to pursue another payment processor. Square said it expected Starbucks to eliminate their partnership altogether before it sets to expire next year, and Square says it will not renew the partnership.

Today’s filing showed the terms were unprofitable for Square. Square lost almost $15 million in the first six months of 2015 from the Starbucks deal. Excluding the first six months of the three-year Starbucks partnership, Square brought in about 19 percent less than it spent processing payments for Starbucks.

In 2012 Square formed a partnership with the coffee retailer and began processing all payments across their 7,000 locations in exchange for Starbucks investing $25 million in their Series D round. The deal was intended to raise awareness of Square’s brand recognition among Starbucks customers.

Starbucks previously had used Bank of America Merchant Services to process its payments and said it was switching to Square because it would save money. Many speculated this meant the deal was financially disadvantageous to Square.

Square’s disclosure comes as Apple announced last week that Apple Pay will be accepted at Starbucks in 2016. The Seattle-based chain did not immediately respond to requests for comment.

So if you want Square processing the money you spend on coffee, it’s probably best to stick to Blue Bottle.