Cash moved one small step nearer to its deathbed with the announcement recently that Square, the mobile payments start-up, would form a partnership with Starbucks.
Starbucks joined forces with Square, a technology start-up that lets you pay for things with a smartphone.
This year, Square will begin processing all credit and debit card transactions at Starbucks stores in the United States, and customers will be able to order a grande vanilla latte and charge it to their credit cards simply by saying their names.
Though smartphone payments have a long way to go before they replace wallets altogether, Starbucks' adoption of Square will catapult the technology onto street corners, and is the clearest sign yet that mobile payments could become mainstream.
"Anyone who's going to break the mobile payments barrier in the US has to overcome the resistance to try anything new when everything we have works really, really well, even cash, which is very convenient," said Bill Maurer, director of the Institute for Money, Technology and Financial Inclusion at the University of California, Irvine.
"But if a big merchant jumping into some mobile payment solution signals to others there is an opportunity here," he added, "that might change the psychology for other merchants."
Starbucks is also investing $25 million (about 787 million baht) in Square as part of its latest round of financing, which values the company at $3.25 billion, and Howard Schultz, Starbucks' chief executive, will join Square's board. Starbucks has offered its own mobile payment app since last year and processes more than a million payments a week. Customers will continue to be able to use it, but they will also be able to use Pay With Square, Square's cellphone app, which eliminates even having to take the phone out of your pocket or sign a receipt.
At first, Starbucks customers will need to show the merchant a barcode on their phones. But when Starbucks uses Square's full GPS technology, the customer's phone will automatically notify the store that the customer has entered, and the customer's name and photo will pop up on the cashier's screen. The customer will give the merchant his or her name, Starbucks will match the photo and the payment will be complete.
Even though Square's app has been well reviewed, it has not caught on with shoppers, which has been Square's biggest challenge as it tries to expand.
That is in large part because of the limited number of merchants that accept payments that way. Most of Square's users are small businesses, like farm stands or cafes that also use Square's credit card reader. However Starbucks could change that.
"Starbucks is one of the largest organisations in world, taking technology like Square and bringing it to a massive scale," said Jack Dorsey, Square's co-founder and chief executive.
Square, which was introduced in 2010, is one of many businesses _ like Google, PayPal, Sprint and Microsoft and start-ups like Scvngr and GoPago _ that are trying to offer mobile payments. But they have been slow to catch on as they require the cooperation of many players, including retailers, credit card firms, banks, phone carriers and phone makers.
And Americans have been just as happy to pull out their credit cards as their cellphones to make a payment. Denee Carrington, a Forrester analyst who recently wrote a report on mobile payments, said that mobile payment providers would need to offer a compelling, safe and convenient experience for shoppers, and that the applications would have to make good use of their personal data, like spending habits, to offer valuable services. Forrester estimates that 30% of US mobile phone owners are interested in using mobile payments, based on a survey of 7,600 adults. It found that younger consumers are the most amenable to using mobile wallets. Still, it predicts that it will take another three to five years before mobile payments reach critical mass in the domestic market.
"We are still in the early days of mobile payments specifically, but the market is accelerating, especially the amount of innovation that's happening in the marketplace," Carrington said.
Square has so far been most popular in small coffee shops, but Dorsey and Schultz said that even though the start-up was now doing business with the nation's biggest coffee chain, the partnership would benefit those small businesses. More customers will have the app, they said, and it will show small businesses near Starbucks stores.
"My hope is by creating a footprint for Square technology in all Starbucks stores in the US, that will be a catalyst for Square to get access to tens of thousands of other small business and democratise payments," Schultz said.