Starbucks will soon be the first national chain to let customers pay with Square's mobile payment application.
Square was founded in 2009 by Jack Dorsey, the creator of Twitter. Users of Square mobile payments app are mostly small businesses and individuals, meaning the partnership with Starbucks could significantly raise the company's profile.
The Seattle-based coffee company said it will start accepting payments from Square's app this fall, in addition to the Starbucks payment app it rolled out a year and a half ago.
To use either of the programs, customers download the apps then link a credit or debit card to the account. When it comes time to pay at the register, they open the app and wave their phone in front of the scanner.
The Starbucks app can only be used at the company's cafes and customers earn rewards when using it. The Square app, by contrast, can be used wherever it is accepted. The app shows users nearby businesses that accept Square payments.
Starbucks will invest $25 million in Square as part of the deal and CEO Howard Schultz will join Square's board of directors.
Dorsey said Square simplifies the cost of processing payments for small business. It charges a flat rate of 2.75 percent of transactions for all cards. With typical purchases where customers swipe their credit or debit cards, the fees banks charge businesses can vary depending on the type of card that's used.
Schultz declined to say what percentage of customers currently use Starbucks payment app, but said it's more than one million customers and growing. He said mobile payments improve the customer experience by making the process more seamless, which in turn allows the barista and customers to connect more.