Pay-by-Smartphone at Starbucks: The Mobile Flow of Compensation

Anthony Miyazaki. Starbucks MobilePay-by-Smartphone at Starbucks: The Mobile Flow of Compensation


We all (hopefully) know that marketing can be broken down into the distribution of information, product innovation, and (often financial) compensation.  And we know that electronic payments have been being made for years.  So what’s so new about Starbucks and their just-announced nationwide acceptance of payments via the Starbucks Card mobile app?  And more importantly, why does it matter?

First, let’s consider how it works.  You start with the Starbucks debit card (which can be loaded with funds via your credit card or PayPal account).  You then use your smartphone application to pay for your purchase by holding up the app-generated picture of a barcode to the scanner at the register.

Starbucks claims that these transactions are actually faster than credit card and cash transactions.  (There’s some debate regarding this.)  They also say that their research shows that consumers are more likely to carry their smartphones than their purses or wallets, something that makes sense in today’s world where going somewhere without your phone is virtually unheard of.

What’s new is that Starbucks claims that the system is “the largest mobile payment program in the U.S.”

Why it matters is that this is a step toward more comprehensive payments systems that can move individual credit cards to smartphones via “near field communication,” which will allow consumers to pay for products by waving their phone near a sensor at the point of purchase.  It will also allow users to transfer other data in a similar manner.  The suggested positive side is that more of a person’s interactive life (personal, financial, medical, etc.) will be concentrated in that ever-present mobile device.  Of course, that’s the potential negative side as well, isn’t it?

So is this the wave of the future of the “flow of compensation”?  Or just a passing fad like some of Starbucks’ less well received drinks of the past?  Anyone for a Raspberry Mocha Chip Frappuccino?

Be sensible,
Anthony Miyazaki

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