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Comment by peppertree | Hacker News Reader

I don't see how this benefits Starbucks.

My family has owned small businesses before and one of the more annoying parts is dealing with the credit card machine and merchant vendors. The rates were always high, the machines were kind of confusing to use and were expensive. The deposits might take a little while. A minor point for the younger people in the family running a business was that they weren't very trendy or hip looking, either.

Small business owners have little of either time or money. Anything you can do to improve that is appreciated. Although SBUX is much larger than the family owned businesses I'm familiar with, I'm sure they appreciate it, too.

We've only owned 1 restaurant and if we were high volume enough, being able to carry the register over to the table and have customers pay right away would have been useful.

If I'm reading Square's website correctly, there's a minimum $1 transaction? Our shoe store in 1990 probably wouldn't have cared. Our coffee shop today would care, though.

Is Starbucks going to stop accepting credit cards? Adding less confusing new machines to the confusing old machines does not result in less average confusion.

[sorry, that was retarded, I confused square with a different payment system. disregard.]

Starbucks will still be accepting credit cards, cash, and now even Pay with Square tabs!

No. Square's product is all about accepting credit cards. From the press release:

"Square will process Starbucks U.S. credit and debit card transactions, which will significantly expand Square’s scale and accelerate the benefits to businesses on the Square platform, especially small businesses, while reducing Starbucks payment processing costs"

https://squareup.com/news/releases/2012/square-starbucks

The Square Register product takes plastic as well as letting people pay via the geo-fencing Pay with Square app.

But square collects 3%, which is much higher than most merchant accounts.

Really? Maybe for a merchant on Starbuck's level, but for small merchants, cc processors definitely charge more than 2.75%. Even if you get a lower percentage rate (impossible) you get charged 0.05 or more per transaction, plus a monthly service fee + monthly equipment fee, etc. Square is definitely a cheaper option.

card present business (like your local coffee shop) pays less than 2% and their monthly fees are also lower. 2.75% range is usually for online businesses (card not present).

I might be wrong but I am under the impression Starbucks runs their transactions as card not present, at least in Canada and I'd suspect also the U.S. This allows them to swipe-and-done a credit card without requiring a signature or chip verification.

The act of swiping your card demonstrates its presence. The fact that there is no signature or PIN requirement is a result of the type of business that Starbucks is (Mechant Classification Code), and the typically low transaction amount.

This thread is full of misconceptions about payment processing which appear to be simple assumptions stated as facts. Having worked for one of the largest merchant acquirers in the world, it reminds me of glad I am not deal with any of that any longer.

Thanks for the information! Is there data on the magnetic strip that wouldn't be provided in a card-not-present transaction, or do the processors take the machines' word that the card was present?

It's very rare for a brick and motar merchant to pay more than 2% processing fee. 2.75% is the high end for ecommerce accounts.

Citation? https://squareup.com says the fee is 2.75%.

And isn't it also possible they gave Starbucks a special deal considering the marketability and value of a deal like this?

When a Square customer walks into a Starbucks, that person's name, picture and order history will automatically pop up onto Starbucks' terminals. It's hard to exaggerate the benefit of such.

Me neither. No restaurant can afford 2.75% per transaction going to Square versus the 1.64% which goes to Visa/Mastercard/Discover[1]. Fortunately for Starbucks, people are willing to pay much more for their cup of coffee than it costs them to make.

[1] http://payments.intuit.com/pricing/

At the scale Starbucks will single-handedly bring them to, you really think they'll be using the default pricing?

Regardless, they're very clear on the post:

>Square will process Starbucks U.S. credit and debit card transactions, which will significantly expand Square’s scale and accelerate the benefits to businesses on the Square platform, especially small businesses, while reducing Starbucks payment processing costs;

Starbucks saves payment processing costs. That's benefitting them.

Square is probably charging cost, or even losing money on this one, just to gain the market share.

Loss leaders can be a good idea sometimes, but when you're dealing with the sort of volume that Starbucks deals with, losing any money at all per transaction is a truly terrible idea.

Fortunately for Starbucks, people are willing to pay much more for their cup of coffee than it costs them to make.

One interesting problem with this deal is that it will call attention to just how much money Square users really are spending at Starbucks.

Imagine if most or all of the charges on your Visa bill were from Starbucks, such that you couldn't help but see the total staring you in the face every month. That's the position a Square user will find himself/herself in, at least until more merchants come on board.

It's nothing that you wouldn't already find out with Mint or many online bank accounts.

You don't mention they also charge $0.27 per transaction. If you do the math that means that intuit and square both cost almost exactly the same for a $25 transaction (square is a little ahead because they also don't charge monthly fees).

So for transactions less than $25 square comes out ahead. I can think of plenty of restaurants that are primarily lunch driven for whom square would make sense (not to mention coffee shops).

Comparing Square to traditional Intuit isn't apples-to-apples. Intuit's GoPayment is a direct Square competitor and has roughly similar pricing: http://gopayment.com/pricing/

As part of the joint venture, Starbucks will invest $25 million in Square and hold an equity stake. Howard Schultz, Starbucks chairman and CEO, will join Square's board of directors.

With ~7000 stores, Starbucks can be a Walmart of sorts in terms of location based services.

Starbucks' massive influence in the payment space is an asset. They're potentially a kingmaker for payment providers. Who else, besides McDonalds, processes as many payments in as geographically diverse an area?

By partnering with Square in return for equity, they are making a play to capitalize on that position. If Square wins in this space, which is much more likely with Starbucks in their corner, Starbucks gets a massive payday.

If they just stick with their existing provider, who is likely already maxed out on their growth curve, there is no such opportunity.

I do. Have you ever just bought something on Amazon because it's just easier? Wouldn't you buy at Startbucks instead of seattle best coffee if it were "easier"?

btw, not that it matters, but Seattle Best Coffee is owned by Starbucks.

I think part of the benefit comes from discovery in the Square directory. Also, Pay with Square is a revolutionary idea which is now accepted at Starbucks

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