We’ve spent a lot of time over the past few months patiently explaining how Square and Stripe, despite both being in the payments business, are really nothing alike.Forget about that! The Square-Starbucks deal just made us throw away our cocktail-party script.
Here’s how they used to be different:
Square, led by Jack Dorsey, offers in-person payments to small businesses, letting them swipe a credit card and buy physical goods or services.
Stripe, run by Patrick Collison, lets startups like Foursquare and App.net build payments into their websites or mobile apps—no physical card required.
It may all sound like paying for stuff to the layman, but in the payments business, those are seen as totally different categories. Whether the card and the customer are physically present even changes the rates businesses pay.
That’s why it was totally cool that, for example, Sequoia Capital was an investor in both companies. They didn’t really compete before.
Here’s how Starbucks made a mess of things.
Square is now processing all credit and debit cards for Starbucks in the U.S., not just ones made using its Pay With Square app.
That includes loading value onto your Starbucks Card. If you link your credit or debit card to your Starbucks Card on Starbucks.com, it will automatically reload for you whenever you run low.
That transaction, Starbucks confirmed for us, will run through Square, as will other purchases on Starbucks.com.
So Square is now officially in the e-commerce payments business, just like Stripe.
Starbucks may be a one-off, special deal that gets Square access to Starbucks’s thousands of physical coffee shops. There’s no sign that Square is interested in taking on Stripe’s startup customers. And it makes no sense for Stripe—at least right now—to try to serve gigantic retailers like Starbucks.
But it does show just how hard it is to draw lines in the payments business.