Square partners with Starbucks, gets $25M in funding, major distribution deal

Mobile payments processor Square has announced a new partnership with Starbucks that will see the company take on responsibility for processing all credit and debit card transactions at corporate-owned Starbucks in the U.S.

Starting this fall, consumers will now be able to pay with the Square mobile app at more than 7,000 Starbucks locations. Additionally, Starbucks is also investing $25 million into Square’s Series D round and Starbuck’s CEO Howard Schultz will join Square’s board of directors.

Although Starbucks is not phasing out the use of its own mobile app, which also allows consumers to pay directly from their mobile phones, Square still benefits — the company’s Square Directory (a listing of local businesses that also accept Square payments) will eventually be integrated into the Starbucks mobile payment app.

The partnership is big win for Square. Although the service is popular with local merchants and speciality retailers, until today, Square hadn’t been able to set itself up with a major retailer that would help it penetrate into mainstream payment processing. Today’s announcement not only gives Square access to an enormous new market, it also helps it diversify its offerings, since the company will be handling all of Starbuck’s payments, not just mobile ones.

The deal is also good news for the startup in light of PayPal’s moves to get into the physical payment market.  In February PayPal announced it had signed a deal with Home Depot that would allow customers in almost 2,000 of the chain’s U.S. stores to pay with PayPal, either via a PayPal card, or by using a combination of their mobile phone number and a PIN.

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