TECH

New Starbucks Mobile Pay System Makes Cash, Credit Cards Unnecessary

01/19/2011 11:47 am ET | Updated May 25, 2011

Have a Starbucks Card? That's so 2010--the coffee megachain has just gone national with a Starbucks Card mobile app that lets you use your smartphone to pay for that morning macchiato.

Starbucks started testdriving the mobile pay system in September 2009, but is set to launch in over 7,500 locations across the country. Unlike more sophisticated mobile pay systems in the works, the coffee chain is capitalizing on the success of the low-fi Starbucks card customers already use. Like the plastic version, the mobile app (available only on iPhone and BlackBerry at the moment) lets coffee drinkers fill and refill their account with PayPal or a credit card, or be set to reload when its empty.

To pay, the app loads a bar code, which is scanned at the counter to pay for the drink. Starbucks customers are already devotees of the material card system--they put $1.5 billion onto the cards in 2010, with one in five of all transactions happening through the cards. The Starbucks base is also a tech-savvy crew: a third of customers own smartphones.

The Seattle-based coffee king claims that their new system is the largest mobile payment system in the country. The app, developed in house, does not use the near field communication technology that mobile companies are exploring for similar credit card/cellphone integration. NFC has been enabled in Google's latest version of Android, as AT&T, Verizon Wireless and T-Mobile USA have formed Isis, a mobile network using NFC.

Though the Starbucks announcement is the biggest splash to date in the mobile payment race, a number of startups have begun to gain traction in their bid to deliver cell phone payments, including Intuit, Verifone and the Jack Dorsey co-founded Square, which just raised $27.5 million in its latest round of funding.

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