Today’s announcement by Square that they secured a processing deal with Starbucks is big, big news, but maybe not for the reasons you think.
The obvious benefit is to Square for managing to catch the tail of the world’s largest coffee retailer. Starbucks is an awesome force in the industry and the best validation so far of the Square premise.
But more importantly, this, at least to me, seems like the the first real shot across (or into) the bow of the key NFC mobile payment players ISIS and Google.
After all, who wants to be the guy at those places that now has to answer the question of why the biggest, daily use food retailer opted to go with an open loop mobile-enabled payment system that isn’t NFC? I wouldn’t want to answer that question.
Our work with Starbucks is all closed loop, which isn’t that big a threat to the NFC players, although it is slightly embarrassing. But an open loop mobile-enabled payment system that doesn’t need NFC? Well, that is something different altogether.
It doesn’t mean, of course, that Starbucks won’t put NFC terminals into their stores. After all, Starbucks is probably the most technically progressive merchant out there at the moment. But, if the Square system takes off at Starbucks, and I don’t see any reason why it wouldn’t, then the argument for a complex provisioning method through NFC certainly becomes less attractive and likely.
Put simply, if Starbucks and Square can mint millions of new Pay by Square customers that then can pay at other merchants as well, then NFC becomes a much less valuable, and interesting, play.
So, the NFC ecosystem loses a bit today. Square wins with this contract for sure. Starbucks benefits with another newsworthy payment approach and, most likely, far improved visibility into their customer base. Heck, even bank issuers won a small battle today, as they are the funding sources behind the payment…..at least for now.
The great game is afoot.
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