One in Four Starbucks Transactions Now Use Mobile Payments

Less than a year after Starbucks launched an app that allows mobile payments, it has hosted 26 million such transactions on iOS, BlackBerry and Android. Roughly one in four Starbucks card transactions is now executed using contactless  mobile payment.


In the nine weeks after it was released, there were three million transactions. But in the past nine weeks, there have been six million, says Adam Brotman, SVP and general manager of Starbucks. One in Four Starbucks Transactions Now Done Via Mobile:


But mobile vastly lags the Starbucks card where it comes to volume. About  $110 million has been reloaded to customers’ Starbucks cards using mobile top up, Brotman says. Some $2.4 billion was loaded onto Starbucks cards overall in 2011.


So 25 percent use mobile payment, but only about 4.5 percent of card top-ups have been conducted on the mobile device. For whatever reason, it appears people are more comfortable using PCs to refresh their accounts, instead of reloading directly on the mobile. 


For those of you who have done both, there might be a simple reason. It is just easier to reload on a larger screen than on a smart phone. 

Starbucks has Processed 20 Million Mobile Payments

Most contenders in the mobile payments or mobile wallet business are hoping to create large-scale platforms used by lots of retailers. Starbucks. on the other hand, has reasons of its own for creating a proprietary system that already has processed more than 20 million mobile payment transactions. 


The approach shows one way even "targeted" mobile payment applications and systems can add business value. For starters, the Starbucks approach does not require inventing anything new. It uses existing tools to quickly reach critical mass.

mobile payments forecast

Starbucks also has clear business drivers, mostly related to enhancing loyalty. 


Since each mobile payment account is tied to a Starbucks card, Starbucks increases the value and usage of its prepaid cards. 


That also means Starbucks benefits from the float on payment instruments that are pre-funded. Starbucks gets paid before products are delivered. There also is some amount of "breakage" as well, the small amounts that might be left on pre-paid cards, and never used.


Starbucks Mobile Pay, the company’s pay-by-mobile application and in-store scanner system, was rolled out nationwide in January 2011. The system, available at roughly 9,000 locations, lets iPhone, Android and BlackBerry users with the Starbucks or Starbucks Card Mobile applications pay with their phones by scanning 2D barcodes on the screen at store registers. Starbucks has processed 20 million mobile payments

Bill Me Later: Change Your Mind about Payment Method

Consumers assume they will have a choice of payment formats when checking out at a retail location, ranging from cash to debit to credit, prepaid or postpaid instruments.

Mobile wallet systems likely will attempt to make that process easier. PayPal's "Bill Me Later" enables users to decide on their payment method up to five days after a purchase.


Bill Me Later provides credit for individual purchases by performing risk analysis during the checkout process, based on little more information than what a customer regularly provides to merchants. By weaving this technology into a mobile wallet, PayPal can issue customer credit and provide a five-day float for each purchase. The customer can change the funding option for each transaction within that time.

It isn't so clear that this will become a major attraction, but it suggests the many nuances of mobile payment that could potentially change the user experience or retail advantage.

PayPal Lets Users Change Their Minds about Payment

Will Mobile Commerce Will Be Driven by Better Experience and Increased Control?

Despite the fact that mobile commerce will include payment and transaction mechanisms, mobile commerce, and a good deal of retail commerce, will not be primarily about the change in payment mechanism, argue analysts at mobileYouth.

In fact, control and access to information will be more important for users, mobileYouth predicts. Payments may be important for the generation without credit cards but it’s their fear of losing control, and avoiding surprises, that will drive adoption.

Mobile commerce also will be about sharing and reclaiming the social experience, mobileYouth predicts. Mobile commerce is not just about making the purchase more informed, or easier, but making it more social.

Providers need to think less about the payment and more about the shared experiences and activities made possible by mobile payment systems. In other words, replicating the value of "hanging out together at malls" is more important than providing a new way to pay for things.

Mobile commerce: information and experience

Era of E-Commerce is Over

Forrester Research e-commerce forecast

John Donahoe, CEO of eBay, has said that the concept of e-commerce is dead and buried, since consumers really don’t care about where they buy, so long as they get the cheapest price. You can thank increasing use of mobile technology for that change.

Now consumers are walking into retail stores, and using their phones to identify better prices for goods they like, and will use either online or offline purchasing to get the price they want.


“Over the last 12-18 months we at eBay have changed our view on e-commerce,” he explained. “We’re now seeing a profound change in how consumers are behaving, and we’re going to see more changes in the next three years than we’re seen in the previous 20 in terms of shopping and payments." 

NFC handset forecast

"Mobile devices are blurring the lines between online and offline at a rate no one would have predicted.” eBay boss declares era of e-commerce is over

As for eBay’s strategy, Donahoe said the company is presenting itself as a retailer-agnostic platform. Price comparison applications on the site will show a broad range of suppliers, all displayed on a level playing field with the competition. eBay will simply process the sale.

Mobile Wallet or Mobile Payment: What Wins in South Africa?

Sparring between contestants in competitive markets is not unusual. Neither are arguments that one or another approaches will not work, or that some approaches are "better." So it isn't unusual that a provider of one method argues the other methods "won't work" in a particular market


Standard Bank operates its own virtual currency "mimoney," which consists of a voucher number delivered to the recipient's cell phone using a text message. SMS. The bank has also teamed up with retailer Spar on a peer-to-peer money transfer service, in which SMS vouchers are redeemed at Spar stores throughout the country. 

Explosive growth in pre-paid money vouchers in South Africa has killed the mobile wallet as a viable payment instrument, says Herman Singh, CEO of Beyond Payments, a unit of Standard Bank.


Singh says that over R100 billion is generated in sales of prepaid airtime and electricity annually, while over 2.5 million money vouchers valued at over R4050 each, are created and redeemed every month in South Africa.

There are a couple of noteworthy angles here, including the use of a virtual currency mechanism and simple text messaging for communications, as well as the prepaid method of payment.

There is, to be sure, a clear argument that the leading developments in developed markets now are different than in developing markets. Mobile wallets and retail payments are bigger in developed markets because "banking and payments" are not "problems," while in developing markets these are key issues.

Likewise, the preferred communication technologies in developed markets are different from developing markets. Text messaging is ubiquitous for users of feature phones that are typical in developing markets. Other technologies are feasible in developed markets where smart phones rapidly are becoming the norm.

As a rule, mobile commerce, including both mobile payments and mobile wallet components, is a bigger issue in developed regions, while mobile banking--in particular remote payment--is a bigger opportunity in developing regions.

Pre-paid vouchers displace mobile wallet demand in South Africa

Mobile "Payment" is Shifting to "Wallet"

Bloomberg technology writer Rich Jaroslovsky has been testing the new Google Wallet, and at least for the moment thinks mobile payment and wallets are less about improvements in the payments process, and lots more about the marketing and promotion advantages.

"This is really the secret sauce in mobile payments, because while, yeah, it is kind of a little bit more convenient, that isn't really what's going to get people to use it," he says. "What's going to get people to use it is the possibility that they can save money." Mobile payment more marketing than "payment"


The mobile payments business is starting over, says David W. Schropfer, a partner at Luciano Group. Ironically, as both Isis and the Google Wallet systems now essentially disclaim any interest in revenue from the transaction process, seeking instead to build new businesses based on advertising and loyalty, the “wallet” part of the mobile commerce business now seems to have “substantially slowed mobile commerce development in the rest of the developed world.”
To a large, though not complete extent, “payments” now are taking a back seat to “wallets,” which probably means we are headed for a period where “mobile commerce” becomes the headline phrase, not necessarily “mobile payments.” Mobile payments starting over 

Retailers Still Not Convinced About Mobile Paymentss

Retailers are an essential partner for developing mobile payments and mobile wallet services, but retailers understandably are leery of supporting the new services until the value is made clearer.


While it is clear that end users, mobile service providers, processing networks, mobile device manufacturers, marketing and advertising networks could benefit, it still is generally unclear what the quantifiable benefits are for retailers, who face a need to invest significantly in payment terminal systems.


That suggests a major conclusion about what it will take to drive retailer interest. It long has been the case that if consumers massively indicate a preference for specific payment modes, that retailers will embrace those preferences to avoid losing business to other outlets. So if the direct value proposition for retailers remains murky, then the ecosystem will have to entice large numbers of consumers to prefer and then demand support for the new features.

In the mid-2000s, Visa, MasterCard and American Express all introduced contactless payment cards that consumers could tap against a payment terminal to complete a transaction. Years later, the number of merchant locations that accept such transactions number 140,000 out of an estimated 11 million overall locations.


Today, the card brands are working toward putting tap-and-pay capabilities, along with offers and coupons, into smartphones. But retailers would face expensive upgrades to their payment systems without assurances sales will follow. A compatible payment terminal might cost between $400 and $500, experts say.

Retailers remain hesitant to move on mobile payments

Mobile Commerce, Payments Inflection Point?

There have been a couple other mobile inflection points in the mobile business recently.

New Jersey Transit Embraces Google Wallet

NJ Transit  is the first public transportation agency to partner with Google Wallet, Google’s recently released contactless payment system.  Using Google Wallet, NJ TRANSIT rail and bus customers have the option to use their smart phones to tap and pay for transportation tickets at select locations.

Now, NJ TRANSIT customers can use Google Wallet to purchase transportation tickets at New York Penn Station ticket vending machines and ticket windows, Newark Liberty International Airport Rail Station (AirTrain), on bus route nos. 6, 43, 80, 81, 87, and 120, and on some buses on the 126 line.

Currently, Google Wallet is available on Sprint’s Nexus S 4G phone and supports Citi MasterCard credit cards and a Google Prepaid Card.

New Jersey Transit Takes Google Wallet

Citi and América Móvil in mobile banking venture

Citigroup and América Móvil have announced a $50m joint venture to offer mobile banking services to millions of people throughout Latin America, starting with Mexico. 

The alliance between the biggest providers of financial and telecommunications services in Latin America, dubbed "Transfer," will allow customers to use basic mobile telephones to set up bank accounts, transfer money, withdraw cash from automatic teller machines, make purchases in stores, receive payments and pay bills.

mobile banking by Citi, America Movil

Why the Mobile Wallet Might Get More Traction than Mobile Payments

The "mobile wallet" (essentially, stored credentials and accounts on a smart lphone) might find greater success than mobile payments (using the mobile to complete a retail transaction) in the near term, a new study of Millennials might suggest. 

Using a mobile device as a substitute for carrying a plastic loyalty card is the top requested mobile payment application for Millennials (over 25 percent  expressed interest). Only 10 percent of  Millennials surveyed expressed interest in using a mobile device as a credit or debit card.

Millenial interest in loyalty programs also suggests a wallet approach might have more value than mobile payments.



Millennials respond to loyalty offers, the study sponsored by Aimia and conducted by Harris Interactive  has found. The online study found that more than 75 percent of U.S. consumers surveyed participate in loyalty and reward programs.



And more than 75 per cent of Millennials say they are more likely to choose a brand that offers a loyalty or reward program over a brand that doesn't offer one. Some 78 percent of U.S. respondents also indicated they would be more likely to do business with a company after earning a reward as well.,



In unprompted responses, Millennials rate loyalty rewards as the top incentive they look for in exchange for sharing personal information with marketers.



Nearly half of Millennials are willing to promote products or brands through social media in exchange for rewards.



Millennials view the option to download coupons or reward certificates as most enticing reason to use a rewards program application on a smart phone.



Some 57 percent of U.S. Millennials use mobile devices to perform price comparisons before making a purchase in a store.



What Millennials value

PayPal Outlines Mobile Payment, Wallet Plans

  PayPal plans

Taxonomy of Mobile Payments

Perhaps the nicest part of this infographic is its taxonomy of mobile payments. There are other ways to categorize the different types of mobile payments market segments.

Some of us might say the taxonomy doesn't address mobile wallet, mobile shopping, mobile promotion or peer-to-peer payments as key market segments, for example. But it's useful.

mobile payments segments

PayPal "Most Trusted" Mobile Payments Brand

PayPal was the brand most likely to be trusted with personal financial data by consumers in nine major markets around the world, in a survey by GfK.


(click image for a larger view)


Credit-card brands Visa and MasterCard were the next most likely global brands to be trusted, followed by Apple, Nokia and Samsung.

In a poll of 8603 people in nine countries, GfK found that financial services firms have the highest levels of trust, consideration and preference among consumers, with a score of 48 percent, when it comes to mobile payments, says Ryan Garner, GfK analyst. Within this category, banks come out on top.

Mobile and telecommunication brands receive significantly lower levels of trust when it comes to controlling financial transactions. Just 10 percent of respondents expressed high confidence and trust in mobile service providers, compared to some other ecosystem participants.

"Trust is the biggest driver of service preference and is most important at driving adoption of mobile payments," says Garner.

Overall, 62 percent of respondents find mobile payments appealing. This is higher among certain key groups, including: younger consumers aged 16-24 (75 percent), innovators (74 percent), and current smartphone owners (72 percent). Developing markets in China (82 percent) and Brazil (73 percent) find mobile payment services the most appealing. Consumers in the United States and Europe seem less interested, at about 50 percent.

Read more here

Mobile Money Strategies for Mobile Service Providers

"Mobile money” is sometimes hard to understand for good reasons: it includes a number of different functions and many different groups of participants, each with slightly or significantly different opportunities and challenges. (Click on images for a larger view)

Among the prominent new contestants are mobile service providers, who see an opportunity to enter a new line of business with direct transaction revenue benefits, namely the transaction fees generated when payment services are provided. Up to this point, that has included both per-transaction fees of some cents per event, plus a percentage of the gross amount of the transaction.

That is changing, at least for debit card payments. But there are lots of other potential business models and revenue streams, and different participants likely will try them all, ranging from local advertising to promotions to point-of-sale apps to loyalty programs.

Mobile Money Strategies for Mobile Service Providers | Mobile Marketing and Technology

Starbucks Mobile Payment Demonstration

The Starbucks mobile payment system might accurately be described as consumer experience and loyalty program, more than a technology breakthrough. It uses a minimum of new in-store or consumer technology and an initially-simple way of replacing a credit card swipe with a bar code reading.

 The 2D barcode in the Starbucks Mobile Card app, which is no longer a QR code in the latest version, currently appears to encode only the card account number, effectively acting as a replacement for the magnetic stripe, notes FaceCash CEO Aaron Greenspan.

"Right now from the POS viewpoint only encoding the account number works well because it doesn't require any additional POS customization," says Greenspan. The advantage is speed: the transaction is fast because it's treated effectively the same as a card swipe, which is already pretty fast.

Starbucks Mobile Payment System Didn't Use NFC for a Reason

Technology decisions ought to be dictated by business requirements, and so should the timing of technology investments. Generally speaking, if a business can wait for the "next generation" of technology, it often should do so. If it cannot wait, and has an immediate business need, it should buy the existing solutions, especially if there is an upgrade path.

The Starbucks mobile-payment app, now available for iPhones, the iPod Touch and several BlackBerry models, is based on the coffee chain’s popular prepaid Starbucks Card, and is an example of that sort of process. You might wonder why Starbucks would deploy a 2D bar code solution now, when it could wait 18 months to two years and possibly use a new system based on one or more near field communications platforms.

The answer is that Starbucks did not think it could afford to wait. Nor, in one respect, is the Starbucks mobile payment system primarily about "payment." It is about loyalty, especially the Starbucks card.

Customers use the private-label card for one in five transactions at Starbucks coffee shops and last year loaded $1.5 billion in their card accounts, up more than 20 percent from 2009, said the company. Since the mobile payment app is linked to the Starbucks card, and since the Starbucks card itself if more about loyalty than "payment" as such, Starbucks is betting that the chance to extend its loyalty program to the mobile handset is worth doing right away.

Not unimportant is the fact that 2D bar codes can be used by a wide range of handsets, while near field communications is only now starting to be introduced. In a scale business, the advantage of large installed base is obvious. So is the fact that the terminal upgrades at roughly 8,000 locations are modest.

With the app, after the customer scans the 2-D bar code at the point of sale, Starbucks deducts the amount of the purchase from his Starbucks Card account over the network.

The physical implementation might not be the most elegant imaginable (one has to have a physical Starbucks card first, and you have to obtain one physically, at a store), but that was not apparently the most-important consideration. Speed to market, low cost and ubiquity seem to have been the overriding considerations.

Starbucks’ Bar-Code Embrace Unlikely to Slow NFC

Payment Methods Changing

Consumer use of cash and checks are declining, use of debit cards and other payment systems climbing, while use of credit cards is flat, according to Nilson Report data.

That explains, only in part, why there now is interest in mobile payments.

Would You Bet Against Apple?

You might be the sort of person who bets against Apple. If so, you'll probably bet against Apple succeeding in any significant way with its rumored mobile payments. The argument against success as a retail store payment vehicle (Apple might builds on iTunes for some other payment-related function) probably starts with the "what's the additional value" argument, but that applies to all proposed systems.

The assumption is that Apple's mobile payment system would have to be as convenient as a credit card swipe. That same objection applies to all other systems as well. Some might argue a mobile payment alternative does not save time; Apple won't either; therefore there is no value and no reason to adopt. Apple will have also have to piggyback off of, or have retail partners deploy, the near field communication terminals required on the retailer end of the transaction That's another barrier.

One possible advantage Apple gains with this new payment scheme is Apple mobile payments bypass the credit card processing fees Apple currently pays for each iTunes transaction. Some might question value for retailer partners and end users. If Apple decides to share those savings with retailers, and rewards users with some loyalty program at the same time, there's the answer to "how do retailers and users benefit."

There are big barriers to mobile payments adoption, ranging from handset capabilities and user habits to entrenched and efficient existing payment systems. But big changes in user behavior have occurred before, when the value was understood. That doesn't mean mobile payments will succeed wildly in the next 12 months or even 24 months. But it could, and Apple starts with a different perspective: it doesn't want to disrupt the traditional payments business. It only wants to enhance the value and stickiness of iTunes.

Apple doesn't have to look first and foremost at its potential direct revenue or profit margin. It doesn't worry so much about those things when it sells music or video or movies. It just wants to make iTunes and its "i" devices so useful and popular that people keep buying them. That makes for a dangerous competitor. Essentially, Apple wants to "give away" what other people need to "get paid for." That is the underlying power of disruption in the Internet space, always.

It's too early to know who wins, or whether Apple will be among them, or why it might win. But Apple, and others, will be dangerous to the extent they clearly understand they have existing revenue models that are enhanced if they extend themselves into mobile payments in some way. The best-placed players might just be those with an existing and powerful revenue model that gets more powerful with mobile payments, without the need to make additional revenue from the payments process itself.

read more here