Is Starbucks a Secret Bank?

Starbucks is known for their coffee but many don't know about their secretive finance operations. 

In a clever scheme, the company uses the deposits of customer rewards card as a massive interest free loan to fund business operations. 

Is this simply a smart business move? or are customers getting ripped off?

How Starbucks Operates Like a Bank While Serving Coffee - WSJ

Starbucks, a $124.4 billion company, trails only McDonald’s as the largest restaurant chain by market capitalization. In this video, WSJ’s Heather Haddon explains how Starbucks used technology to garner its loyal customer base and why mobile orders are shifting the chain’s business priorities.

Everyone seems to think that everyone is using mobile payments

From Computerworld –

“On a Starbucks analyst call, a senior Wall Street analyst asked if mobile payments will soon be obsolete. The fact that such a question was even asked illustrates the level of mobile payment perception distortion.”

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Starbucks’ Mobile Payments Jolt

From PYMNTS.com –

“Apple might want to take a bite out of Starbucks’ mobile payments strategy.

In its fourth-quarter earnings call last October, Starbucks CEO Howard Schultz said the launch of Starbucks’ mobile order and pay app in December would be the single-most important technology innovation introduced in 2014. And after the first earnings call of 2015, it’s clear that leading mobile payments is still on Schultz’s mind.

Analysts were quick to jump on the mobile order and pay bandwagon with a series of questions during the company’s first-quarter earnings call yesterday (Jan. 22). However, Schultz and team were sure to keep one important detail close to the vest: how specifically mobile order and pay is doing in its Portland, Oregon test market. Financially speaking, of course. The executive team didn’t hesitate to emphasize the success of the program’s rollout with specific numbers.”

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Starbucks CEO throws down gauntlet on mobile payments, says coffee company will have ‘major role to play’

From Geek Wire

“Starbucks is not messing around when it comes to the tectonic shifts occurring with consumers, especially as it relates to those mobile devices that coffee drinkers are carrying around in their pockets.

And just how important is mobile technology for the Seattle coffee retailer?

Consider this: Starbucks said today that roughly 16 percent of its U.S. sales now occur through a mobile device, with the company now handling about seven million mobile payments each week. It also controlled about 90 percent of all mobile payment transactions last year.”

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McDonald’s Order-Ahead Mobile App Falls Flat

From Bank Innovation

“Many in the restaurant and fast food space are looking to cash in on the success Starbucks has seen with its mobile wallet app. Starbucks, as of Q1 2014, has 12 million active users (active = Nirvana in the mobile wallet space) spending $6 million a week on skinny non-fat with an espresso shot lattes (I’m not sure if that is a real selection or not but the data points are impressive). All in all, Starbucks’ app accounts for 15% of Starbucks’ transactions.

Howard Shultz, the dynamic CEO of Starbucks, recently announced the addition of an ‘order/pay-ahead’ feature allowing mobile wallet users to skip the queue. This is an obvious and welcome addition to the app, and one already in play by multiple players in the space including Chipotle, White Castle, and Five Guys.

The perennial king of fast food, McDonalds, is currently facing multiple challenges. Newer competitors such as Chipotle are taking market share, millennials aren’t flocking to buy a Big Mac (research by Technomic found younger millennials in the U.S. traffic to McDonald’s has fallen almost 13% on a monthly basis since 2011), and their longtime rival Burger King is making significant business model changes under CEO Daniel Schwartz (who at 33 years old just happens to be a millennial).’

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Why Is The Starbucks Mobile Payments App So Successful?

From Forbes

‘ “No single competency is enabling us to elevate the Starbucks brand more than our global leadership in mobile, digital, and loyalty. Starbucks is a clear leader in mobile payments and we are encouraged by how consumers have embraced mobile apps as a way to pay.”- Howard Schultz, 2013’

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