Mobile Payments At Starbucks Explode In 2013, Passing The $US1 Billion Mark

Starbucks drove over $US1 billion in mobile payment revenue in 2013, according to BI Intelligence estimates. These are in-store transactions that Starbucks customers complete by using their phones at the register.

Here are the key takeaways:

  • During the fourth quarter, Starbucks’s mobile payment volume reached $US340 million, according to our estimates. For full-year 2013, Starbucks stores channeled $US1.1 billion in mobile payments, which we define as transactions at physical locations assisted by mobile devices on the consumer or merchant side.
  • Starbucks mobile payments averaged 5 million per week in the U.S. and Canada in the fourth quarter of 2013, more than double the 2.1 million per week rate in the fourth quarter of 2012. That translates to roughly 60 million mobile payments during the fourth quarter, up from 25.2 million in the fourth quarter of 2012, for 135% growth year-over-year.
  • Previously, we had forecasted $US30 billion in mobile payments for the U.S. in 2013. That means that Starbucks drove a full 4% of U.S. mobile payments volume in the year.

Starbucks reports earnings based on their own fiscal quarters, which run ahead of calendar quarters. For simplicity’s sake, we’ve transposed Starbucks data to the corresponding calendar quarters.

Click here for the charts and data in Excel.

It should be noted that in the company’s latest earnings call, Starbucks CEO Howard Schultz reported mobile transaction numbers for just the U.S., when in the past he had announced numbers for the U.S. and Canada.

To account for this discrepancy in our estimates we rounded weekly mobile transactions up to 5 million (Schultz said mobile payments were running at “nearly” 5 million in just the U.S.) to account for Canada. The Starbucks mobile payments app is currently available in the U.S., Canada, and the U.K.

We think the success of Starbucks’s mobile app can be attributed to three features of its business: low-cost products that are habitually purchased, fervently loyal customers, and widespread and convenient retail locations. To pay with their phones, Starbucks customers open their Starbucks app, which is loaded using credit cards or gift cards. The app generates a bar code that can be scanned by the baristas to facilitate the payment. Starbucks also accepts the Square Wallet app, but the overwhelming number of mobile payments are made through its own app.

Starbucks is doubling down on its mobile payments business, as we reported in a recent edition of our Payments Insider newsletter. The company created a chief operating officer position to be filled by former CFO Troy Alstead, so that Schultz can can focus more on the company’s evolving payments business.

Here is a look at our estimate of total number of mobile payments:

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