Starbucks Corp.'s mobile payments system will soon be as ubiquitous as the coffee company's retail stores.
The Seattle merchant plans to roll out the technology to all its company-owned U.S. stores by early next year, Cliff Burrows, the president of Starbucks' U.S. operations, said Wednesday during the company's investors conference in New York.
It began testing the service in late 2009 at stores in California and expanded in February to more than 1,000 sites, including Starbucks operations inside Target Corp. stores. In October, the trial added about 300 stores in New York City and on Long Island.
"Mobile payment is exceeding our expectations and has been very well received by our customers," Chuck Davidson, the category manager for innovation on Starbucks' card team, said in an e-mail.
The service lets customers pay for purchases by displaying a mobile barcode for scanning at the point of sale. It uses an application available on Apple Inc.'s iPhone and Research In Motion Ltd.'s BlackBerry mobile devices that draws funds from Starbucks prepaid loyalty card accounts and generates the two-dimensional barcodes.
Observers expect the company to add an application for phones using Google Inc.'s Android operating system.
Burrows highlighted the service as part of efforts by Starbucks to speed up the movement of customers through checkout, a big challenge for the retailer.
"Our effort has to be on making sure that a customer never leaves the line because we are too slow or never walks past a store because that line is too long," Burrows said.
Todd Ablowitz, the president of the Centennial, Colo., payments consulting firm Double Diamond Group LLC, said Starbucks has succeeded in getting customers to use its closed-loop gift cards, which has helped its mobile strategy.
"Everyone knows they've got more transactions per card than any other retailer, and we're talking by an order of magnitude," Ablowitz said.
"It's completely unsurprising to me that they've figured out mobile payments," he said.
Starbucks plans to complete the national rollout by the end of its fiscal second quarter in March.
It is in the midst of installing special POS readers in more than 9,000 of its stores nationwide.
The company did not confirm which other markets are already equipped, but this week it added Honeywell International Inc.-branded mobile-payment scanners at Phoenix-area stores.
Consumers can fund their prepaid accounts through Starbucks' mobile app using a major credit card or through eBay Inc.'s PayPal payment system.
The application also lets customers check their rewards-program status.
Starbucks' mobile strategy has succeeded because its customers are avid gift card users, said Drew Sievers, the chief executive officer of mFoundry Inc., the Larkspur, Calif., vendor of the software that runs the Starbucks application.
"I can't think of another merchant that has the penetration of stored-value cards that get used on a daily basis," Sievers said. "Most merchants' gift cards are single-purpose, single-use gift cards that don't get reloaded."
Starbucks customers loaded more than $1.5 billion into its loyalty card accounts in the fiscal year that ended Sept. 30, up 20% from the preceding year, the company announced in November.