Is Starbucks’ Rewards Card a Drag on the Mobile Payments Market?

February 8, 2019         By: Steven Anderson

Mobile payments as a market has been mixed, depending on where you look. In some places, it’s taking off like a house afire. In others, it’s struggling to even get of the ground, like in the United States. But the US’ sluggish adoption rate may have an unexpected culprit, as expressed recently by Forbes: the Starbucks Rewards app.

At first blush, that might seem ludicrous. After all, Starbucks is pretty much the poster child for mobile payments, having achieved such success with the platform that it’s had to look into mobile-only stores to keep all the mobile orders out of the physical order line. Yet Forbes raises a noteworthy point: the mobile payments market in the US is almost disturbingly fragmented.

Mobile payments in the US, Forbes notes, tend to focus on smaller amounts. Though nearly half of the transactions in the US are carried out via debit or credit card, Americans spend an average of four times more using paper checks.

Moreover, there are literally dozens of mobile payments options, but with a few key leaders: Apple Pay has 22 million users to its credit, Google Pay 11.1 million, and Samsung Pay 9.9 million. That gives each of the original equipment manufacturers (OEMs) a decent slug of extra revenue, but not exactly the kind of thing that makes a market.

Worse, none of these has the user base of Starbucks Rewards. Starbucks is actually ahead of Apple Pay by almost 1.5 million users, and by 2022, that number is expected to reach 2.3 million. Throw in the fact that only 12 percent of vendors accept mobile payments—contactless cards are increasingly looking to eat the lunch of OEM payments systems, as we’ve seen recently—and a bit of a problem emerges.

So is it fair to blame Starbucks here? Not really. There are too many other factors at work to say that, if Starbucks were gone, those 23.5 million users would migrate. In fact, there’s likely overlap, with Starbucks and Apple—or Google, or Samsung—sharing users in some degree.

No, Forbes…Starbucks Rewards isn’t killing the mobile payments platform in the US. It’s not helping, but it’s not killing it. It’s a lot of different factors at once, some of which are changing even as we speak.