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At a local farm stand or art fair, you might have seen the small business vendors pull out a small, square, pronged tool that they plug into their cell phones and then use to swipe credit cards. This device, aptly named Square, allows these companies to do business with customers who often carry no cash.

But Square’s presence is about to get much more prominent than the local vendors could manage. Although Starbucks already has a mobile payment app, it has decided to install Square devices in its stores. Eventually, the transaction won’t require the customer to show anything to get his or her beverage: no money, no credit card, not even a cell phone.

Specifically, customers will need to download the Square app on their phones. The first time they use it at their local Starbucks, they show the barista at the cash register the bar code. From then on, their phone will send a signal to the Square device any time they come back into the store. The register will feature the customer’s name and picture; simply by stating their name, customers can pay for their drink.

This functionality overcomes one of the main remaining barriers to smartphone payments. Customers figure if they need to get out their phone, why not just reach for their credit card? By eliminating this step, the Square method in Starbucks stores makes it far more convenient for a customer to pop in for a mocha, Frappucino, or chai tea everyday.

Furthermore, a recent survey showed that 30 percent of U.S. consumers indicated their interest in mobile payment applications—especially young buyers who already do nearly everything on their phones. According to Starbucks’ chief executive Howard Schultz, “My hope is that by creating a national footprint for Square technology in all Starbucks stores in the U.S., that it will be a catalyst for Square to get access to tens of thousands of other small business and democratize payments.”

He’s so confident of that expansion, Starbucks even invested $25 million in Square!

Discussion Question

  1. Would you use the Square payment method at Starbucks and other retailers? Why or why not?

Source: Claire Cain Miller, “Starbucks and Square to Team Up,” The New York Times, August 8, 2012