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Starbucks reduces mobile payments friction as app’s reach grows

Starbucks’ plan to dominate mobile commerce is becoming a bit clearer with a new application revamp that puts payments front and center.

The coffee giant will add two new features to its iPhone app on March 19: Digital tipping and a new shake-to-pay feature. Even though both features have been in the works for quite some time, the update further cements Starbucks’ goal to build a mobile strategy that is split equally between payments and loyalty.

“Digital tipping is nothing new, but what is cool about the Starbucks app is the new digital form factor,” said Peter Olynick, lead for the card and payment practice at Carlisle & Gallagher Consulting Group, Charlotte, NC.

“For consumers the integration has to be seamless to make this successful, something Starbucks does well,” he said.

“By implementing shake-to-pay, Starbucks has made it easy for their app to be top of phone. According to Carlisle & Gallagher’s mobile wallet research, payment choice and real-time incentives rank in the top three desired features and functionalities consumers would prefer in their mobile wallet.”

Mr. Olynick is not affiliated with Starbucks. He spoke based on his expertise on the subject.

Brewing up mobile success
The update will let consumers add a digital tip for their barista when paying with the Starbucks app.

Additionally, the app will be updated with a shake-to-pay feature that makes mobile payments more visible in the brand’s app. By shaking the app once it is open, the bar code functionality will automatically be pulled up, eliminating the need for consumers to dig around and find the payment feature on its own.

“Digital tipping has been a top request from our customers, especially as more and more customers are using their phone to pay, and shake-to-pay is a fun feature that conveniently lets customers access their card from anywhere within the app,” said Maggie Jantzen, spokeswoman at Starbucks, Seattle.

Since digital tipping has been on Starbucks’ radar for quite some time, the actual implementation of the feature highlights how the coffee giant is beginning to move beyond simple mobile payment transactions.

Starbucks is continually credited as a top retailer that has grown mobile payment awareness among consumers with a bar code-based payment app that also integrates with the coffee chain’s My Starbucks Rewards loyalty program.

The new app revamp suggests that Starbucks has now established a strong user base of consumers who are using their mobile devices to pay repeatedly and therefore may be ready for more sophisticated features.

The updates to Starbucks’ iPhone app will roll out in the United States, Canada and Britain with an Android version to follow later this year. The digital tipping is only available within the U.S.

To promote the new app, Starbucks is distributing small in-store cards promoting the new features. One side of the card lists the features, and the other side encourages consumers to set up their username and password before the app is updated.

Starbucks claims that more than 11 percent of transactions now take place through the company’s mobile app.

During the coffee giant’s first-quarter 2014 results, it was revealed that this increase in mobile payments is close to hitting five million weekly transactions (see story).

Digital shift?
The new app features comes on the heels of an organizational restructure that Starbucks put into place earlier this year to give CEO Howard Schulz more control in the brand’s day-to-day work with digital and physical assets.

The shift could also signal that Starbucks wants to try its hand at mobile rewards and payments outside of the confines of its bricks-and-mortar stores (see story).

The idea is that Starbucks may be able to capitalize more on the rewards and loyalty portion of its mobile payment app, which leverages location and is integrated into Starbucks’ cross-channel initiatives.

The soon-to-be-released app update is meant to streamline mobile payments, but could also be more focused on entertainment than utility, according to some experts.

“I can’t imagine a scenario where a shopper would say, ‘Cool, I’ll download this app so I can shake to pay,’” said Paula Rosenblum, managing partner at Retail Systems Research, Miami.

Final Take
Lauren Johnson is associate reporter on Mobile Commerce Daily, New York