loyalty

Starbucks is not just in the business of coffee and real estate — they are moving into mobile payments and are Apple Pay’s real competitor.

Earlier this week, Starbucks dropped Square for mobile payment in its stores, unwinding the partnership the companies announced in 2012.

Square had made Square Wallet obsolete in favor of its newer Square Order, but Starbucks declined to support either. According to a spokesperson for Starbucks:

Starbucks is not adopting Square Order in our stores. We opted to build our own mobile ordering solution, leveraging our own mobile app and world-class loyalty program.

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If anyone can bring mobile payments to the mainstream, it’s Apple. Sort of. Apple will lead the way, but given Android was 85% of phones shipped last quarter, Google must follow suit for mobile payments to be truly mainstream. Fortunately, if Apple’s execution works, it will be a simple matter for Google to clone.

The basics of Apple Pay: you scan your credit cards into the iPhone 6 — the phone encrypts the card’s data so nobody can obtain its details — and you then pay via NFC with the phone or Apple Watch at merchants. Touch ID is used to authenticate. This will work at all standard NFC terminals, which is slowly becoming more prevalent.

As you can see, Apple is an enabler, not a disruptor. Apple Pay makes it easier to use the credit cards you already have. This keeps the banks and credit card companies happy because they remain front and center, as opposed to say, Square, which cuts banks out of the value chain.

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