August 08, 2012

Payments innovator Square and coffee giant Starbucks announced a new partnership today between the two companies. Starbucks will now process U.S. credit and debit card payments with Square, and Starbucks customers will also soon be able to purchase items with Pay with Square, Square's mobile app.

Square's directory of merchants who use the company's payments technology will also soon be available through Starbucks digital platforms, including, eventually, the Starbucks mobile app.

As part of the agreement, Starbucks will also invest $25 million in Square, and Howard Schultz, the chairman, CEO and president of Starbucks, will join Square's board of directors.

"The evolving social and digital media platforms and highly innovative and relevant payment capabilities are causing seismic changes in consumer behavior and creating equally disruptive opportunities for business," Starbucks' Schultz said in a statement.

The expansion of Square's technology to 7,000 Starbucks stores in the U.S. will greatly expand Square's public visibility and scale, Square said in the statement. This should help accelerate the growth of Square's technology to other small businesses and retailers. And there is a lot of room for growth: according to Square, more than two-thirds of the 27 million small businesses in the U.S. don't accept credit cards or debit cards because of the interchange fees and cumbersome application process for card reader technologies. Square charges 2.75 percent for each transaction it processes with all major credit cards.

Starbucks customers will still be able to use the Starbucks mobile payment applications for iPhone and Android that already exist, in addition to the Pay with Square app.

[See Related: Can Square, Intuit and Other Mobile Payment Providers Compete With A 12-Cent Debit Card Transaction?]

Jonathan Camhi is a graduate of the City University of New York's Graduate School of Journalism, where he focused on international reporting and interned at the Hindustan Times in Delhi, ...