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Starbucks Dominates Mobile Payments. Why Isn’t Anyone Else Even In The Game?

January 30th, 2013

Then why is Starbucks so successful at mobile payments? Is it because Starbucks already had trained its customers to use the stored-value cards and just convinced them to switch over to the same thing on phones? That’s an easy answer, but it’s meaningless. Every chain’s customers are already trained to use plastic cards for payment. The hard part is getting them to switch to using their phones.

Is it because of signage that tells customers about the mobile app, or baristas that push customers to try it? One of our co-workers gets coffee from five different Starbucks stores and doesn’t remember ever having seen a sign or heard the mobile app mentioned by an associate.

Then again, he’s not a classic Starbucks customer. He doesn’t know his barista’s name or sit at a table nursing his drink as he works on his laptop. (In fact, he admits he only goes into a Starbucks to get a very large coffee that he later pours into another container that he finishes off over a day or so. No wonder the baristas won’t talk to him.)

But regular customers do have a relationship with their baristas. Whether they know the barista’s name, their faces are familiar. That familiarity breeds trust. And that trust means that if a barista suggests trying to pay with a mobile app, the customer is much more likely to try it.

And once the regulars start doing it, you don’t need signage. You’ve turned your key customers into walking ads for mobile payments. They use the system. More casual customers see them using it and try it. Not every customer keeps using it, but enough do that it gets momentum—the one thing most mobile-payments schemes don’t have.

But that wouldn’t transfer to, say, PayPal’s in-store payment system at Home Depot, would it? It could. Some contractors are in there every day, and they know which associates have a clue—including deep knowledge of what’s needed on a job site, what Home Depot has and what the store can get.

Maybe the only reason those contractors aren’t using PayPal is because an associate they trust hasn’t suggested it.

Maybe the same is true at Toys”R”Us, where mobile payments seem like a perfect fit for gadget-happy customers and every POS is also wired for PayPal. Or any of the sports or apparel chains where Google Wallet has a foot in the door but can’t seem to get any traction in customer usage. Or all those chains that have signed on with MCX, once it finally rolls out its mobile-payments system that on the surface looks suspiciously like the Starbucks approach.

No, it might not work. But what’s clear is that it has worked for Starbucks, and nothing that any other retailer or mobile-payments player has tried has come anywhere close to Starbucks’ success.

And until other chains start trying what actually works, mobile payments everywhere but at Starbucks will keep spinning its wheels.


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