Bankers have been promoting the mobile payments idea for years, saying that using phones to make purchases can shave seconds compared to transactions using cash or standard payment cards.
However, Starbucks Corp., one of the few stores with a mobile payments program in place, says these transactions are little different from other card purchases, and the real benefit to the merchant comes when people use its app to reload their accounts while waiting in line instead of at the register.
The Seattle company has a thriving prepaid card program, but many customers have been managing their accounts at the point of sale — adding time to the interaction by inquiring about their balances and using another payment card to add funds.
These steps are typically handled as separate transactions, in addition to any coffee the customer might buy.
Now, with the mobile payments app, people can do all of this on their own.
Chuck Davidson, the category manager for innovation on the Starbucks card team, said "a lot of customers who were previously waiting until they got to the cashier to reload have taken that activity out of the line and they're reloading on the phone," significantly reducing their total transaction time.
Particularly when the store is crowded, customers are eager to keep the line moving by handling reloads ahead of time, and Starbucks is thrilled that they want to. To the customer, reloading the card at the cashier "is like [when] you're at the grocery and you whip out your checkbook," Davidson said — no matter how fast you handle it, the process may still annoy everyone else in line.
Though many customers are wowed by the app's ability to handle payments, they keep using it because of its balance-check and reload features, he said.
Starbucks is keenly aware of the ways prepaid cards can slow down the line, and has long been looking for ways to address the issue. It once considered putting a balance-display screen on its cards so people would know when their funds are low. That plan never materialized with plastic, but it finally came to life with the introduction of the Starbucks app for Apple Inc.'s iPhones, Davidson said.
"The card is a piece of plastic, and it can't necessarily tell you how much your balance is," Davidson said. "For an app to be meaningful, it has to give the customer utility."
George Tubin, a senior research director at the research firm TowerGroup Inc., said mobile phones are making prepaid accounts easier to manage. "It completely makes sense that they want to move that out of the physical world and into the virtual world, so that the tap-and-go" contactless payment "truly is a faster type of transaction," he said. Without the app, "that reload process definitely adds a lot more time, because it's a credit card payment on top of tap-and-go — it's a double transaction."
Today the Starbucks app can be used to pay at over a thousand of the company's locations, primarily those located in Target Corp. stores, and allows cashiers to charge a prepaid Starbucks card by scanning a bar code that is displayed on the phone's screen. Though it functions much like holding a contactless card up to a reader, it does not require the user's phone to have an embedded contactless chip.
