In Pictures: Starbucks' Rocky Relationship with Square

October 16, 2015 10:41 AM

Empty Starbucks cups can be found all around Manhattan on the ground and at the top of trash cans in New York, seen here at Sheridan Square, as the company plans to double their locations in the US. Tues. Sept. 19, 2006. Robert Caplin/Bloomberg News

Robert Caplin/Robert Caplin/Bloomberg News

Starbucks and Square, once the hottest couple of the payments world, are splitting up. But their relationship was never perfect; signs of trouble were obvious from the very start.

Square, a credit card reader made for smartphones, is arranged for a photograph in New York, U.S., on Monday, Oct. 25, 2010. Square Inc.'s mobile-payment technology allows smartphone users to make credit card payments and the availability of funding for new ventures. Photographer: Jin Lee/Bloomberg

Jin Lee/Bloomberg

Sidelined Square's Hardware

Unlike most Square merchants, Starbucks never used Square's hardware or its Register app in its stores. The decision undermined Square's claim that its Register tech could function as a full replacement for a point of sale system.

A barista prepares a coffee drink at a Starbucks Corp. store in Beijing, China, on Tuesday, March 8, 2011. Starbucks Corp., the world's biggest coffee-shop chain, will start selling its Via instant coffee in the greater China region, which it forecast will be its biggest growth market in two years. Photographer: Nelson Ching/Bloomberg

Nelson Ching/Bloomberg

Customer Confusion

Starbucks did, however, accept Square's Wallet app. But the system added unneeded complexity to the purchasing process, causing some bad publicity. Starbucks had to educate its staff and recalibrate its scanners to accommodate Square's technology.

Howard Schultz, chairman and chief executive officer of Starbucks Corp., speaks during a media event in Beijing, China, on Wednesday, April 18, 2012. Starbucks is planning a bigger push into smaller cities in China as the world's largest coffee-shop operator triples stores in the country that will become its second-biggest market by 2014. Photographer: Nelson Ching/Bloomberg *** Local Caption *** Howard Schultz

Nelson Ching/Bloomberg

Short-Lived Board Stint

When Starbucks began its relationship with Square in 2012, part of the agreement involved putting Starbucks CEO Howard Schultz on Square's board. Schultz left just a year later, handing the seat over to former Goldman Sachs CFO David Viniar.

Ignored Square Order

One of the latest innovations in Starbucks' mobile payment strategy was adding order-ahead services to all of its U.S. stores. Square already had such a capability in its Square Order app, but Starbucks chose to build its system without Square.

A sign for the launch of the Apple pay system, from Apple.Inc is seen displayed at the entrance to a McDonald's Corp. restaurant in London, U.K., on Tuesday, July 14, 2015. Apple Inc. is making the U.K. the first market outside the U.S. for its digital-wallet system as the company fights for a place in the electronic-payments industry. Photographer: Chris Ratcliffe/Bloomberg

Chris Ratcliffe/Bloomberg

Choosing Sides

Starbucks' decision in early 2015 to support Apple Pay within its app was a slight to Square, which never got similar treatment despite having a years-long relationship with the coffee chain, which is also a Square investor.

The Starbucks Corp. logo is displayed on a paper cup in Beijing, China, on Wednesday, Feb. 1, 2012. Starbucks is the world's largest coffee-shop chain. Photographer: Nelson Ching/Bloomberg

Nelson Ching/Bloomberg

Muddy Math

Square had its own reasons for being frustrated with the Starbucks relationship - it was losing money. In its IPO filing, Square reported Starbucks transaction revenue at $123 million for 2014, but reported transaction costs at $151 million. The companies have already agreed not to renew their processing agreement when it expires in the third quarter of 2016.

Saw It Coming

It was clear from the start that the math wouldn't add up for Square, with the deal seen as more of a marketing move than an effort to earn money. When rumors surfaced last year that Square was seeking a buyer, some wondered if the company would appeal to sellers once they got a glimpse of Square's financials.