When Chase revealed on Tuesday (Feb. 23) that it had cut a deal with Starbucks to incorporate ChasePay into the SBUX mobile app this year, it signaled that ChasePay needs to be taken seriously. More precisely, it means that the mocha-merchant mobile-powerbroker takes ChasePay seriously, which is perhaps the best endorsement it could get.
ChasePay’s previous big deal was with MCX, which, to be fair, isn’t exactly the endorsement you want in mobile payments to be taken seriously. But for those care about mobile money—and who in this space doesn’t?—nobody disses Starbucks.
“I can’t imagine a bigger feather in their cap than Starbucks,” said Todd Ablowitz, president of Double Diamond Group. “Chase is making a serious run at mobile payments. Clearly, they view their number one position in card issuing as a major leg up, and they want pole position in this huge future market. This is a big deal because the largest issuer in the world is now squarely competing with Apple, Google, Samsung, and even Visa and MasterCard.”
Competing? Absolutely. Will the Starbucks embrace help meaningfully with marketshare? That’s a big question mark. The SBUX announcement is akin to those mega-deals announced in the military arena, where a vendor is touting that the Air Force, for example, has signed a deal where they could purchase as much $90 billion worth of widgets. Sure, but it could also purchase $100 worth.
Why? Starbucks has agreed to put ChasePay into its huge mobile wallet, which is great. But if ChasePay doesn’t convince a lot of Starbucks customers to default to ChasePay in that wallet, it doesn’t help much.
That said, what the move does deliver is credibility, in the sense of streetcred. The vast majority of Apple Pay transactions are based on marketing buzz and the implication that using Apple Pay at Trader Joe’s or Whole Foods is a cool, hip thing to do. (Note: My teen-aged daughter has informed me that merely uttering the words “cool” and “hip” is sufficient to prove that the speaker isn’t. That regrettably may be true.)
If Starbucks says enough times that it is now including ChasePay in its wallet, many Starbuckians will see that as an endorsement and may just default to it. But Starbucks is not in the habit of doing that. Indeed, Starbuck’s go-it-alone manner makes this deal itself noteworthy.
At Tuesday’s investor’s day presentation, Gordon Smith, CEO of consumer and community banking for Chase, made the announcement. According to a copy of his slides, the slide said that the SBUX agreement will drive boost Chase Pay usage because “Starbucks has high frequency, habitual customer spend to help drive Chase Pay adoption” and noted that Starbucks has more than 7,500 company-operated U.S. locations. (The implication is that franchised locations are not part of the deal, but it’s not explicit.)
“Chase Pay can also be used to reload a Starbucks Card within the Starbucks mobile app and on Starbucks.com,” the slide said.
According to a story posted on the Double Diamond site, Smith told attendees “We are really excited to be able to partner with Starbucks” and that “we’ve had a long relationship with them and it’s a terrific company.”
That’s all true, but Apple Pay has also been incorporated into the Starbucks mobile app, so it’s not clear how that gives Chase Pay much of an advantage. It’s not as though Starbucks chose to have Chase Pay and refused to incorporate Apple Pay.
Interestingly, Smith’s choice to stress the company’s “long relationship” with Starbucks undercuts Chase’s own message. After all, it makes it less impressive that SBUX is accepting Chase Pay. It raises the question “Maybe this is solely about Starbucks wanting to be good to its long-term partner and not as much of a Chase Pay endorsement as it initially appeared to be.”
Indeed, Starbucks seems to be taking the position of the-more-the-merrier. Why not allow Starbucks shoppers to use any major payment option out there? It has to have some lower threshold as there are some integration dollars and time that needs to be spent—not to mention that Starbucks doesn’t want to hear about payment failures through its app.
Hence, the news really is that Chase Pay has cleared that threshold, which until this week had not been a given.