Receiving Wide Coverage ...
Squarebucks: One small step for Square may turn out to be a giant step for mobile payments. The start-up has struck a mega-partnership with popular coffee chain Starbucks that could very easily revolutionize the payment space. Starting this fall, Starbucks will begin processing all of its debit and credit card transactions in the U.S. using Square technology. The deal also comes with a $25 million investment that places Starbucks CEO Howard Shultz on Square's board.
During the partnership's initial roll-out, customers will still have to pay for their food and drink at the register since Square technology is being fully integrated into Starbucks' existing payments platform. They can use the free Pay with Square smartphone app to make a purchase, but will need to show a Starbucks employee a bar code at the register. Tech experts speculate, over time, the partnership could enable purchases anywhere in a Starbucks (similar to how the Apple store currently does its business) or even allow customers to pre-order and pay for drinks while within walking distance from a store. Shultz wouldn't formally comment on other ways in which Square's fancier components could be put to good use, but he did tell Wired his chain "will be opportunistic."
Even without the technological bells and whistles, the deal is a definitely game-changer since it illustrates how innovative start-ups can threaten existing industry strongholds. According to the Journal’s All Things D blog, Starbucks will be lowering its payment processing costs, and shares of the terminal maker Verifone tumbled on the announcement. Should Square’s integration at Starbucks prove seamless, entrenched players, which have already seen their swipe fee structures hotly contested (and detested) by retailers, will have to deal with the serious possibility other merchants will take their business elsewhere.
Obligatory StanChart Update: Standard Chartered isn't taking possible rogue regulator Benjamin Lawsky's allegations of Iranian money-laundering lightly. The FT reports the British bank is considering filing a countersuit against U.S. regulators as some of its legal advisers believe "there is a case" for claiming reputational damage. Meanwhile, the Journal says U.K. banking officials have come to StanChart's defense, asserting that the move by New York regulators to revoke the bank's state license are based on a "factually inaccurate" assessment.
Wall Street Journal
Knight Capital Group's brush with death via rogue computer was actually closer than originally suspected. At one point during its now infamous software glitch, the brokerage firm actually held about $7 billion of stocks. Traders were able to get the figure down to about $4.6 billion by the end of the trading day. The malfunction ultimately caused the firm $440 million in losses.
Morgan Stanley isn't being dissuaded by Knight's technological problems. The company is moving to replace some of its "well-paid" bond traders with computers ahead of Dodd-Frank regulations that are expected to push derivatives trading onto electronic platforms.
Citi is launching a program that will allow distressed homeowners to rent their homes after signing the deed over to the bank in an effort to limit foreclosures. The program will initially be offered in Arizona, California, Texas, Florida, Nevada and Georgia, but could be rolled out in other states if proven successful. A similar "deed-in-lieu" of foreclosure program already exists at Bank of America.
New York Times
Mortgage rates, already at a record-low, could actually be even lower, if banks were satisfied with the "unusually large gains" they are making on home loans. Profits are getting a boost largely due to the low interest rates banks pay on the bonds they bundle mortgages in that are then sold as pensions or mutual funds to investors. Industry experts say these profits can't be passed on to borrowers because new regulations have made mortgages that much more expensive to originate.