Will Starbucks, Square Take Mobile Payments Mainstream?

Wednesday, 8 Aug 2012 | 2:16 PM ET
Nelson Ching | Bloomberg | Getty Images

Starbucksis billing its recent partnership with Squareas a "breakthrough deal for the marketplace," according to CEO Howard Schultz, hinting at how the company isn't waiting around for mobile payments to catch on with the broader public.

The new partnership between Starbucks and Square allows Starbucks customers to pay for their purchases using their mobile device. Starbucks will begin rolling out the new mobile payments feature this Fall and plans to offer payments via Square at all of its locations before the holiday season, Schultz said.

Mobile payment platforms have been slow to catch on with many consumers. However, the deal may be just enough prod more into using their devices as portable checkout counter, Square CEO Jack Dorsey says.

"I think its going to move faster than anyone expects," Dorsey said on CNBC's "Squawk on the Street" Wednesday. "You see this transition to mobile being a device to pay, and this is bringing it to the world in a major way."

Basically, the customer uses the Square application to store their credit card information. When a customer wants to pay with their smartphone, they open the Square application, where a barcode will appear. The application then scans the barcode to pay at a Starbucks counter.

Digital Wallet Goes Mainstream
"This is a breakthrough deal for Starbucks and Square," says Howard Schultz, Starbucks CEO, explaining the new high tech way for customers to pay for transaction, with Jack Dorsey, Square CEO.

Schultz said his company has been in conversation with numerous tech companies who have been "trying to crack the code on how to monetize mobile payments." He added that it wasn't until Starbucks started talking to Square that they realized mobile payments full potential.

"As soon as we met Jack and Square, we realized there was an opportunity to significantly enhance the customer experience at Starbucks, differentiate ourselves from everybody else in the retail business," Schultz told CNBC's Squawk on the Street .

Mobile payments make sense because smartphones are "clearly replacing many devices," and becoming the primary unit for many consumers, Schultz said.

More than that, paying with a mobile device offers consumers an easier way to pay, he said.

"People have their phone on them all the time, its a seamless transaction," Schultz said.

Schultz didn't give estimates about adoption rates, but said that he expects customers who already use a Starbucks card — which is over 25 percent of the company's customer base — to "...migrate off the card on to the Square platform very quickly."

—By CNBC.com’s Cadie Thompson

email: tech@cnbc.com

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  • Matt Hunter is the senior technology editor at CNBC.com.

  • Cadie Thompson is a tech reporter for the Enterprise Team for CNBC.com.

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.

  • Jon Fortt is an on-air editor. He covers the companies, start-ups, and trends that are driving innovation in the industry.

  • Lipton is CNBC's technology correspondent, working from CNBC's Silicon Valley bureau.

  • Mark is CNBC's Silicon Valley/San Francisco Bureau Chief covering technology and digital media.