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  • Kshitija Kaur & Risav Chakraborty

The Bank with a Bean Licence

Tall, Grande, Venti, Trenta – it all begins with choosing from the all-too-familiar cup sizes at your neighbourhood Starbucks. Only to be followed by a series of other decisions to make: A cold brew? A pink refresher? Perhaps a cheesecake frappuccino… or maybe even a matcha tea latte?


Yes, we’ve all bean there, done that.


With a menu featuring a delicious range of vibrant quenchers, Starbucks prides itself on bringing a little more joy to the everyday cup of coffee ☕. But the options don’t just end there – Starbucks has carefully crafted superior and seamless experiences for customers by embedding financial and lifestyle products that extend customer engagement, both before and beyond the purchase event at the store. These embedded services come in various forms – mobile payments, stored value cards, gift cards, reward programs, contactless payments, wearable payments, and even Bitcoin payments and digital collectables for the Web3 generation.


In her a16z Summit talk, Angela Strange shared her belief of how “every company will be a FinTech company” in the not-too-distant future. Starbucks has been masquerading as a FinTech company for a while now.


By introducing the My Starbucks Reward platform, the coffee firm implemented virtual wallets and branded cards, enabling users to preload funds and purchase directly from Starbucks. This further comes with the incentive to receive double the stars as reward points to be redeemed for perks like free coffee or merchandise. For Starbucks, this translates to having a source of free lending with no interest and full visibility of customer profiles that promote cross-sell and upsell opportunities. And since these stored values can’t be redeemed for cash, they have fewer regulatory requirements, thus being recorded as a liability for Starbucks to use for business.


Let’s espresso this numerically to highlight how the company has really been making some star-studded bucks:

  • As per Starbucks’ Q4 Fiscal 2022 Results, the active Starbucks Rewards membership went up 16% in the US to 28.7 million members, and the company recorded a global store count of 35,711.

  • The company ended the period with a consolidated net revenue of $8.4B.

  • Of the recorded liabilities in Q4, $1.6B accounted for stored value card liability and the current portion of deferred revenue.

Those surely are some Trenta-sized figures, ain’t it?


By tying long-term retail to embedded FinTech via its robust rewards system, Starbucks is maximising personalisation to drive brand growth at scale, outpacing its competitors and even big banks in deepening customer relationships that stand tall on the pillars of valuable benefits and a streamlined checkout process.


Just as its slew of colourful brews come infused with notes of different flavours, the coffee purveyor has equally infused flavourful initiatives in the customer journey to ensure an experience as memorable as the drinks themselves. We journey through these very events (one sip at a time) to discover the secret menu of FinTech innovations that boost Starbucks’ caffeine game. After all, a seamless checkout is just the cream on top of a brewtiful coffee spree!



A Coffeehouse of Customer Convenience

For Starbucks, serving as a ‘third place’ between work and home has always been at the forefront. To achieve its vision of forming better connections with its consumers, it laid the groundwork in 2001 when it first introduced the Starbucks Card, given initially to partners as a prototype before being officially launched to the general public. A bit more fine-tuning over the years resulted in the Starbucks Card rewards program, and eventually, the Starbucks Gold Card that catered to the Starbucks “super users” with extra freebies and in-store benefits.


2009 saw the consolidation of both concepts to form My Starbucks Rewards, which was in line with the launch of the Starbucks Card Mobile application. By allowing US users to check their balance, reload their cards, and view transactions, the coffee juggernaut focused on delighting its customers with the ease of convenience. In the following years, as technology progressed, so did Starbucks’ adoption of the same to track purchase frequency, analyse performance indicators, and empower dynamic rewards. Customer-centric rewards meant tapping into customer preferences and behaviours, which meant automating offerings that drive customer retention as well as lifetime value – placing the company under titles of “neobank”, “FinTech’, and even “an unregulated bank”.


This was accompanied by achieving a more frictionless payment service for its US members, topped by the amenity of having varied payment alternatives:

  • Starbucks embraced mobile payments by teaming up with Square, shaking up the retail space by giving customers a quick way to explore nearby businesses, browse menu information, store hours and transaction history, all on their phones.

  • It later selected J.P. Morgan’s Chase Commerce Solutions as its payment processing tool, laying the foundation for a nationwide rollout considering the wave of innovation in the digital payment ecosystem.

  • By joining forces with Amazon, Starbucks came up with the “Starbucks Pickup with Amazon Go”, a store concept that lets customers bypass the checkout when they pay for pre-orders via the Starbucks app.


Now, the next thing to tick off its bucket list was ensuring the same customer convenience and human connection on a global scale:

  • In the UK, Starbucks joined Barclaycard for contactless payments, becoming one of the few high street retailers who were introducing payment technology.

  • Linking the technology play to human perception, Starbucks Japan released Starbucks Touch: The Pen – a pen with a built-in NFC wallet to pay for things.

  • Transporting to the deserts of Saudi Arabia and UAE, Starbucks and Visa helped accelerate the use of Apple Pay by offering Visa cardholders free upsize/upgrades on their orders when paying with Apple Pay.

  • It forged a regional partnership with Grab’s delivery network across Southeast Asia, bridging the ordering and in-store channels to continue making the Starbucks Experience more fulfilling.

  • It also partnered with Vietnamese e-wallet MoMo, further hoping to enhance and bring a different style of experience to customers.


The Third Place Connection to Web3

Already en route on the digitisation path, Starbucks also dipped into the curiosity around the virtual world. The coffee-titan began crafting its Web3 journey back in 2018, where it collaborated with Microsoft to allow crypto payments for its products. A year later, it struck a deal with the eagerly awaited Bakkt Bitcoin trading platform in exchange for the use of Bitcoin by customers in its stores. These collaborations opened doors for tapping into the potentially huge market, increasing the chance of popularity amongst crypto fanatics for Starbucks.


Proving its commitment to ethical sourcing, it trode down the path of blockchain adoption in 2020 to enable customers to have digital, real-time traceability of their coffee from farm to cup. Powered by Microsoft’s Azure Blockchain Service, the initiative intends to not only empower farmers with more visibility of their hand-picked beans, but also let customers view their purchase's impact. It wasn’t until 2021 that Starbucks actually began to leverage the now-launched Bakkt wallet for Bitcoin payments in the US. In the same year, it expanded its payment services to include Bitcoin in El Salvador, the same time the country adopted Bitcoin as legal tender.


The company is ardent in enabling experiences that will allow its consumers to engage in new ways with the brand and as a community. Its most recent move in leveraging Web3 revolves around unveiling the Starbucks Odyssey – offering its US members and partners the opportunity to earn and purchase digital collectable stamps (NFTs) that will unlock experiential benefits that are uniquely Starbucks.


The Pursuit of Doing Good – One Connection At a Time

Elevating the customer experience while creating a positive impact on communities is what Starbucks aims to accomplish through its many ventures. Reaching the level of satisfaction that is savoured right from the first sip throughout the checkout journey is surely a whole latte work. With customer expectations getting more grande by the day, the coffee chain’s pursuit of rewarding its members with more of what they love only grows stronger and helps it to indulge in offering the best of tech and experiences.


And while they still can’t seem to get the names on the cups right (sorry Starbucks), they’re well on track in providing consumers the full coffeehouse experience, inspiring and nurturing the human spirit – one person, one cup, one neighbourhood, and one rewarding product at a time.


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