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Starbucks’ Apple Pay integration will brew up in-app revenue

Starbucks’ integration of Apple Pay into its popular mobile application will permit quick reloading of the coffee retailer’s loyalty cards, sending more money into its app while burnishing its lead in mobile payments.

By putting Apple Pay support into version 3.2.1 of the Starbucks app, users can add funds to their Starbucks card without having to enter payment information or passwords. The update means 13 million app users can reload their Starbucks accounts using Apple’s Touch ID feature, versus having to enter a credit card.

“Starbucks is the undisputed mobile payments retail leader and this Apple partnership builds on the lead they established in 2009, with their Starbucks card app,” said Wilson Kerr, vice president for business development and sales with Unbound Commerce, Boston.

“This reduces friction and will likely mean more money gets loaded into the app.”

While other bricks-and-mortar merchants talk up the potential of mobile in-store, Starbucks is leading the way with a platform that puts mobile at the center of payments, loyalty and ordering.

Leading the pack in mobile payments.

Starbucks’ mobile-payments dominance is due to a perfect storm of factors. It has more than 40 million prepaid cards, combined with relatively affluent, smartphone-toting, caffeine-loving, daily buyers of a low-price product.

Starbucks continues to see broad customer adoption of its mobile payment technologies, with more than 13 million customers using its mobile apps in the United States.

The company averages more than 7 million mobile transactions in its stores each week. This number has consistently grown over the past year.

In December, Starbucks introduced Mobile Order and Pay into 150 stores in Portland, OR, and has plans to roll it out to more than 600 stores in the Pacific Northwest in the near future. A national rollout is expected to be completed later this year.

A number of quick-serve restaurants have started to test mobile ordering. Initial reports suggests some of these businesses are struggling with integrating mobile ordering into their operations, with wait times shorter for customers who walk in without pre-ordering.

Starbucks states its mobile ordering program is progressing smoothly and expects it to drive mobile payment transactions by enabling customers to avoid lines and have a better Starbucks experience.

Mobile platform
One reason Starbucks expects an easy transition to mobile ordering is because of how the proprietary technology integrates with the chain’s existing mobile platform.

Reducing payments friction for coffee lovers.

Mobile will play an important role in the introduction of a pilot project in New York focused on express locations that will offer a streamlined assortment and integrate mobile payments and mobile ordering to provide a faster experience.

“The real question is whether or not Starbucks will update their POS, to allow Apple Pay to be used to pay for coffee, versus just loading the card,” Mr. Kerr said. “This is unlikely, in my opinion, as Starbucks has worked long and hard to gain visibility into what gets spent, why, where and by whom.

“Apple Pay at the register would interrupt this data collection.”

Final Take
Michael Barris is staff reporter on Mobile Commerce Daily, New York