December 7, 2011, 12:16 PM

Starbucks brews mobile payment success

Consumers used its mobile app to make 26 million transactions this year.

Lead Photo

A simple tap is all it takes to generate a bar code that can be used to pay for at item at the store's point of sale.

Since the January debut of the Starbucks Corp. mobile app, consumers have made more than 26 million transactions using the app to buy a Starbucks beverage or pastry. A key to the app’s success is that it is more than a mobile payment tool, suggests one analyst.

To pay using the app, a consumer taps the Card button to display her account balance. When ready, she taps a Touch to Pay button next to an image of a Starbucks card; that generates a bar code that can be read by a bar code scanner at the point of sale. Consumers have reloaded $110.5 million onto Starbucks cards directly through the mobile app, Starbucks says.

However, the app does much more than enable a payment that could be more easily accomplished with a plastic Starbucks card. Consumers can store details about their Starbucks cards in the app along with their favorite drinks. They can send gift amounts of between $5 and $100 for use at Starbucks to others via email or to the recipient’s Facebook account. Consumers also can check their rewards status in the My Starbucks Rewards program via the app.

The app’s true value is that it enables consumers to do more than pay, says Rick Oglesby, an analyst at research and consulting firm Aite Group LLC. “Starbucks is leveraging the mobile app as an extension of its overall brand and as a way to increase the brand’s presence among consumers,” Oglesby says. “The actual payment component is nice and valuable, but ultimately, when you look at the capabilities built into the app, the value extends beyond having a quick and easy way to pay.”

Starbucks says mobile payment is the most popular app feature overall. During the first nine weeks of the program there were more than three million transactions, compared with six million transactions for a nine-week period starting in October, demonstrating a significant jump in customer adoption, Starbucks says. The growth is solid, Oglesby says, but not astronomical. “Consumer behavior changes very slowly,” he says.

The Starbucks mobile app demonstrates that mobile payment programs can work in the United States, Oglesby says. “There is real consumer and merchant value there,” he adds.

Consumers can use the Starbucks mobile app at nearly 7,000 company-owned Starbucks stores, 1,000 Target Corp. stores and nearly 1,000 Safeway Inc. stores. The Starbucks mobile app is used most often in New York, Seattle, San Francisco, Chicago and San Jose, CA.

Starbucks released an Android version of the app in June and a version for Canada in November, and plans to release an app for the United Kingdom in January for use at more than 700 Starbucks stores.

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