Jack Dorsey: Today Starbucks Signed up for Square

This announcement makes me happy, for Square and Jack Dorsey as a young business leader. I love everything about the business idea, execution, design and tone of the overall strategy.<p>Noteworthy points from the press release<p><pre><code> The partnership terms include: - Customers will be able to use Pay with Square, Square’s payer application, from participating company operated U.S. Starbucks stores later this fall, and find nearby Starbucks locations within Square Directory; -Square will process Starbucks U.S. credit and debit card transactions, which will significantly expand Square’s scale and accelerate the benefits to businesses on the Square platform, especially small businesses, while reducing Starbucks payment processing costs; - Using Square Directory, Starbucks customers will be able to discover local Square businesses -- from specialty retailers to crafts businesses -- from within a variety of Starbucks digital platforms, including the Starbucks Digital Network and eventually the Starbucks mobile payment application; - Starbucks will invest $25 million in Square as part of the company’s Series D financing round; - Starbucks chairman, president and ceo Howard Schultz will join Square’s Board of Directors. </code></pre> <a href="https://squareup.com//news/releases/2012/square-starbucks" rel="nofollow">https://squareup.com//news/releases/2012/square-starbucks</a>

Here's what's in it for Starbucks: Square's cheaper.<p>Square loses money on transactions below $6. The reason is for the sake of simplicity they waive the per-transaction fee that Visa/Mastercard charges them and just charge a flat percentage of 2.75%. But even though this is a relatively high percentage, it's not enough to recoup the cost of the per-transaction fee at low transaction sizes.<p>Take a $2 coffee charged to a Visa credit card. Visa charges Square 1.76% + 6 cents, or 9.5 cents. But at 2.75% Square only collects 5.5 cents.<p>So even if Starbucks was already paying wholesale Visa/Mastercard rates, they'll save 4 cents or more a cup thanks to Square's "simplicity subsidy".<p>Now multiply that by a few billion cups. Starbucks saves millions, and Square is happy to pay it to drive their growth into the stratosphere.<p>Source: <a href="http://feefighters.com/blog/can-square-make-money-with-its-new-pricing/" rel="nofollow">http://feefighters.com/blog/can-square-make-money-with-its-n...</a>

I think more than any other benefit, Square has been validated by a premier American chain. It will be a much easier sell to other large chains. The big money for Square is in having these large customers with multiple POS deployments, where overhead will be small compared to revenues, at least relative to single shop customers.<p>It will also put their product in front of end customers, many for the first time. I for one have heard/read about Square since they first started shipping readers, but had not actually seen the product in action till last weekend (live in Silicon Valley).

Can someone explain me what it means for customers? As far as NYC goes, each Starbucks accepts Visa, Master Card, Discovery and American Express (the card that plenty businesses hate). So what is the benefit for the customers?

Holy grey-on-grey readability disaster, Batman!<p>And shouldn't 140 characters have been enough?

The initial advantage Square had was “green fields” Most of their customers didn’t accept Credit Cards so they did not have incumbency issues. That’s what makes this win impressive. However, it also highlights just what Square has to go through to win a very large account. SB’s had to agree to tear out and replace their existing POS system. That’s a big risk, headache and cost and customers will use that leverage (and genuine pain) to drive hard bargains.<p>Also worth noting is that SB’s mentions processing costs will be cheaper. It’s hard for me to imagine that SB was overpaying with their last vendor so I worry about the economics on this deal. Maybe it’s the anchor tenant though that allows for additional enterprise deals to follow so is worth it. I can imagine other large retail organizations that had any interest were on the sidelines saying "It's one thing to service 10,000 food trucks but come on!" They'll stand up and listen now with this.

Wow, huge deal for Square. I'm very curious what the terms of the deal are: presumably Starbucks isn't willing to pay much more than what their current processing fees are (maybe a tiny bit more for the premium of being able to use Pay with Square?), so Square must be losing a decent chunk of change in exchange for the huge marketing and growth this gets them.

Interesting. Starbucks is obviously not going to use the error-prone dongles. I suspect Square will provide some sort of custom "Pay With Square" solution, perhaps tied into Starbucks' existing point-of-sale system. Any way you look at it, it's a huge deal for Square, Starbucks is absolutely the best venue for Square and likely the key building block to really push out a new checkout experience such as "Pay With Square".

<i>"... I am pleased and proud to announce that today Starbucks signed up for Square ..."</i><p>Starbucks has a history of taking risks with startups ~ <a href="https://en.wikipedia.org/wiki/Kozmo.com" rel="nofollow">https://en.wikipedia.org/wiki/Kozmo.com</a>

Is this yet another middle man to suck fees out of the system? I have not kept up with Square but despise the though of yet another fee leech that is compiling a list of my purchases to sell to annoying advertising companies.<p>/shoutAtClouds

I signed up for square about a month and a half ago. I ordered my little device at the same time and it still has not showed up at my door step. To me, they have been a lousy service so far sadly.

Awesome news for square. I am very eager to see how this changes the natures of: 1) The Starbucks App - will square replace it outright or will there be an option to use starbucks or square? 2) Paying with a card at starbucks - same registers or new registers with square dongles? Hopefully its a better dongle if so...<p>PS - Anyone noticed how they seemed to be stepping around the idea of those local businesses being other coffee shops? Craft businesses in the Press Release...like craft coffee shops?

I really do not see the benefit of this deal. Square - sure, another bunch of retailers. Starbux, not so much. NFC will take over and then square is out. can someone explain?

Jack's signature is "@jack"? Nice.

So does this mean that Starbucks will use the same Square interface that we layfolk use? I find it impractical that they use this, and not something that integrates with their existing systems, but then that would mean that Square has opened up some sort of API to them? When will the rest of us get to see something like this, if so?

I really hope square improves their reader. Practically every time I've used this system, as a customer, it seems to take a couple of tries before it actually recognizes the card. This may be okay for lower volume businesses, but for starbucks I could see this backing up lines.

Once Starbucks are on the Square system, might that be the perfect opportunity for Square to flip a switch and ask customers for their bank details?<p>If Square could do a GoCardless with all those consumers that use Square, both Square and merchants could benefit massively...

Does this save money for Starbucks over their own branded card? Due to the rewards available, I'd assume many of their highest volume customers are using it, and would be unlikely to switch to Square unless those rewards were transferable.

Is this just for Starbucks US stores or is it for all of North America?<p>If it's just for US stores then the title should probably be amended. Being a Canadian, I've never seen a merchant using a square device.

It's a great validation of developing and iterating the business initially with the small 'mom &#38; pop' business to the point where traction allows you capture the really massive customers.

This entry is duplicated First entry is in <a href="http://news.ycombinator.com/item?id=4353817" rel="nofollow">http://news.ycombinator.com/item?id=4353817</a>

The announcement aside (line 1 of 20), this "letter" is some poor PR spew. Jack, if you're listening, you need a personal letter stylist. Letters are like jeans that people read.

Can someone explain this to a layman who "only" uses credit cards at the moment? How is whatever this is going to make my checkout at Starbucks quicker or more convenient than a card or a $5?