The deal includes Starbucks investing $25 million as part of Square's Series D financing round, as well as Starbucks CEO Howard Schultz joining Square's board of directors. The valuation was $3.25 billion according to the New York Times.
With the Starbucks implementation of Square nationwide, digital payments and mobile payments may be poised to truly become mainstream. There are a number of companies in mobile payments, such as eBay's PayPal, Google and others. But Square's deal with Starbucks could be the first time that many people use digital or mobile payments in physical retail locations.
Starbucks customers will be able to use Pay with Square, using the Android and iOS mobile payment application in U.S. stores starting this fall. Using the app, Square enables merchants to identify customers so that they don't have to even take their phones out of their pockets. Merchants can see a photo of the customers, who just have to identify themselves with their names. (Customers would have to have previously entered their credit card information into Square.) Consumers will also be able to find Starbucks locations using the mobile Square Directory.
Square will then process U.S. credit and debit card transactions in Starbucks locations by integrating with point of sale systems, which will instantly expand Square's footprint across the U.S. Starbucks will also move to processing physical debit and credit cards using Square technology at the cash register.
Square, headed by Twitter cofounder Jack Dorsey, was originally known for enabling payments for individuals and small businesses with its Square card reader. Square has been used by about 2 million individuals and businesses so far. But with this deal, Square's larger ambitions to take on the entire offline payments industry come clearly into focus.
Square has been actively moving beyond just payments, recently expanding its digital loyalty "punch cards" for merchants to offer specials to loyal customers. Also in June, Square named former Goldman Sachs and Salesforce.com executive Sarah Friar as chief financial officer, a move that positions the company for a potential initial public offering in the future.
