[jcdavis]

Wow, huge deal for Square. I'm very curious what the terms of the deal are: presumably Starbucks isn't willing to pay much more than what their current processing fees are (maybe a tiny bit more for the premium of being able to use Pay with Square?), so Square must be losing a decent chunk of change in exchange for the huge marketing and growth this gets them.

[philip1209]

"Starbucks isn't willing to pay much more than what their current processing fees"

Let us not forget that there may be a dichotomy in processing fees of credit cards at Starbucks between register-based transactions and digital/mobile-based Starbucks card reloads. Square doesn't have to beat the former to be competitive - only the latter, because it seems that Square will be on track to replace the current smartphone scanners at Starbucks registers.

Let us also not ignore that this is Starbucks offloading liability - when dealing with payments on a massive scale, one has to deal with a variety of frauds that may occur. With the current Starbucks card reloads before the point of sale, they may be starting to encounter fraud based on the volume of sales they encounter. However, Square has essentially specialized in managing this type of fraud. Hence, the Square partnership could simply be an acknowledgement that the Starbucks card payment system has become mainstream enough that it justifies a dedicated security division, whether it be internal or external, and that Starbucks opted for external Square.

[joelrunyon]

They mentioned the investment as part of a series D financing. I'm assuming any tradeoff in per/transaction costs is going to be more than made up in the scale and regular usage that Square is going to get from this partnership.

[lincolnq]

I have heard that Pay With Square causes people to spend more money.

[salman89]

Anecdotal, but at a sandwich shop the other day, I tipped $1 when the cashier handed the iPad to me. Not sure if I would have done the same when signing a regular receipt.

[ry0ohki]

Starbucks is very good at staying on the cutting edge. They were one of the first to offer FourSquare specials, iTunes credits, and they seem to partner with just about any semi-relevant startup out there.

[riams]

Losing a decent chunk of change? How can they lose something they wouldn't otherwise have had at all? It's only normal to assume that they have special terms for Starbucks, but it doesn't mean they're losing anything.

Unless you mean that Square is providing the service at a loss to Starbucks?

[jcdavis]

Yes, I would guess they are providing this service at a (slight) loss to Starbucks.

[daveying99]

With billions in revenue per year, Starbucks has direct advantageous deals with credit card companies that probably follow them no matter what transaction system they use including Square. In other words, they are likely to pay less than the standard Square fees.