Today upstart payments network Square announced a new deal with coffee giant Starbucks that could be a big step toward wider acceptance of smartphone-based payments. Under the deal, Starbucks will accept payments made through the Pay with Square smartphone app at 7,000 U.S. stores.
From the press release:
Beginning this fall, in addition to the existing iPhone and Android Starbucks mobile payment applications, Starbucks customers will be able to use Pay with Square to pay for their purchases at participating company operated Starbucks locations in the U.S. Customers simply need to download the Pay with Square application and set up an account on their iPhone or Android device.
This seems like a great way to get more consumers onboard the mobile payments bandwagon. The kind of transactions that you make at Starbucks -- small payments where you're often very aware of a long line of impatient people behind you -- are the perfect environment to showcase the virtues of the technology: ease and speed. And it will give the millions of loyal coffee junkies who visit Starbucks daily a reason to try out mobile payments. Square is betting they will, and that they'll look for other places they can use Pay with Square.
I've written about mobile payments before, but Square's system works a little differently than others. Like Google Wallet, it still requires you to tie it to a debit card or credit card that will ultimately handle the purchase.
But unlike Google Wallet, Pay with Square doesn't use MasterCard's PayPass or any other consumer-facing payment terminal. Instead, a user opens up her smartphone app and, using a secret PIN, authorizes payment for whatever she ends up ordering that day at the store in question. As soon as she does that, her name and picture pop up on the retailer's screen. The retailer simply rings up whatever purchases the user orders, and Square handles the rest. Some retailers also sweeten the deal by using Square's software to dish out rewards after a certain number of purchases.
In practice, it works kind of like in the old days when a store owner recognized you, rang up your purchases and just "put it on your tab." And that could be just the thing for busy customers looking to get their caffeine fix on the way to work.
Still, there are some caveats. Because they haven't yet entered the mainstream in the U.S., the security of mobile payments hasn't really been tested on the scale it has with debit cards and credit cards. If you lose your phone with Square loaded on it, the company says you should email them and change your password. But if it takes you awhile to realize your phone is gone and it isn't passcode-protected, it seems possible thieves will be able to make unauthorized purchases and drain your bank account.
What do you think? Would you use Pay with Square or any other mobile payment technology?
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