Pay with Square at Starbucks: The Biggest Moment Yet for Mobile-Phone Wallets

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If you stop by Starbucks regularly for a caffeinated fix, you’re about to have a good excuse to try Pay with Square, Square’s mobile-payment app for iPhone and Android. The coffee chain has struck a deal which will result in 7,000 Starbucks-owned U.S. locations accepting Pay with Square, starting this fall.

The agreement has multiple other facets: Square will handle Starbucks’ credit card processing and Starbucks will promote local businesses that accept Pay with Square. Starbucks is also investing $25 million in Square, and Starbucks Chairman, President and CEO Howard Schultz will join the payment startup’s board.

The big news is Pay with Square being deployed across Starbucks — and it is, indeed, big. At the moment, Pay with Square is accepted at around 40,000 locations — mostly neighborhood businesses such as independent coffee shops, restaurants and beauty salons. The agreement with Starbucks will put it in a major nationwide chain for the first time, and therefore puts it in closer competition with Google Wallet, which is already accepted at Home Depot, Office Depot, Starbucks rival Peet’s, Macy’s, RadioShack, 7-Eleven and other major merchants.

But Google Wallet has a major gotcha: You need one of a handful of Android phones with built-in NFC technology. That’s what lets you pay by tapping your phone — twice — against a MasterCard PayPass payment terminal.

Unlike Google Wallet, Pay with Square doesn’t require NFC. It works with the iPhone and a bevy of Android models. And you don’t even have to take your phone out of your pocket: If you’ve got a favorite spot, such as your neighborhood Starbucks, you can tell the Pay with Square app to automatically open a tab each time you enter the establishment. The cashier IDs you by seeing a list of nearby Pay with Square users, with their names and photos, on a tablet or phone used to handle the transaction.

Pay with Square is designed for simplicity, not heavy-duty security. If it were widely used to pay for big-ticket items, you’d want more layers of fraud prevention. For little purchases, though — like, oh, a cup of coffee — it’s just about perfect. It’s certainly faster than swiping a card or forking over cash and waiting for change.

(CLARIFICATION: Square has plenty of security behind the scenes, and doesn’t store your credit-card info on the phone. But it does’t make you enter a PIN to make a purchase, so in the end, it’s reliant on the cashier paying enough attention to make sure that you look like the person in the photo. Of course, that’s arguably better security than is offered by credit cards…)

Both Pay with Square and Google Wallet face competition from still other mobile-payment apps such as GoPago and LevelUp, which come at the proposition with still different approaches. It’s all felt a tad experimental, and none of it is anywhere ready to render credit cards and plastic obsolete. But with Pay with Square and Starbucks teaming up, we’re about to see what happens when an app running on lots of phones is accepted (and promoted) by a huge chain that serves millions of people a day. It’s a first step towards a situation similar to what’s already going on in Japan, where plenty of people use their phones to pay at McDonalds and the like.

I’m excited to see it in action — and I don’t even drink coffee.

Wally SirFatty
Wally SirFatty

I can tell you with 100% certainty that I will never pay for goods or services with my mobile phone. 


Of course the one thing square (and it's competitors) don't support yet is chip and pin that exists pretty everywhere else in the world (the banks claim it is to protect us... try not to laugh at the claims here it's supposed to be coming here to the US in 2013... some shops in towns with large number of tourists already have it in place...


• The exchange of credit card information is no longer an option. 

• The sharing of personal information in financial transactions is unnecessary. 

• We want to return to the anonymity of cash.

Imagine this:

On a merchant's printed receipt, or on their tablet screen, or on their smart phone screen, a merchant presents a QR code within which is embedded a public name, a transaction ID and an amount. 

Starbuck's Coffee, 1599 B Street, Seattle WA.



A customer focuses their smart phone on the QR code and snaps a picture with an application that will now do the following:

1) Decode the QR code to retrieve the name, transaction ID and amount.

2) Connect to the credit cloud to confirm that the transaction is valid and that the payment amount is accurate.

3) Present to the user the merchant name and amount for verification and approval.

The user approves the payment from their smart phone.

The customer's QR credit cloud app then reconnects and authorizes the payment. This authorization, which uses the consumer's connected and associated credit card provider, charges the customer's account and delivers payment to the merchant's account. 

Transaction complete.

The merchant's own QR credit cloud software informs it that the transaction is complete, payment in full has been received.

At no time was information about the consumer shared with the merchant. Complete anonymity was maintained. Just like cash.

QR codes to facilitate financial transactions in the credit cloud. No Square dongles, or Wallets, or credit card exchanges necessary.

I call it QRazyPay.


It's too bad that Starbucks went with a company that doesn't support W7P. They should have opted for Dwolla as their mobil-payment service. Thier choice will keep me from visiting thier stores.


Actually, I have seen several small businesses adopt this method for accepting credit cards from their customers. After asking one of the owners why, he explained that the fees are much lower helping them keep costs under control.

It seems that Starbucks is behind the curve on this one - and the small businesses adopted this after seeing the benefits.


Sorry, pay by mobile is really old news in many parts of the developing world.

Many people in the developing world simply cannot get together the necessary ID to open a bank account, so the only access to anything that stores financial value is their prepaid mobile account.

So guess what, several Telco's in various parts of the developing world (I was involved in some in the Pacific) have implemented systems that allow prepaid credit to be transferred between mobiles.  Credit resellers not only can sell prepaid credit but cash it out also.  Several of the regional banks are getting in on the act to allow additional cash in, cash out facilities.

No app required, not even a smart phone, just a simple SMS.


Looking for feedback and serious conversation about an alternative to mobile payment interfacing.  We are looking at building a dynamic image system as an interface only. This includes multiple points of verification on a cloud based system.

And no hardware required.

Looking for feedback and serious conversation about an alternative to mobile payment interfacing.  We are looking at building a dynamic image system as an interface only. This includes multiple points of verification on a cloud based system.