When Apple revealed that Starbucks plans to accept Apple Pay in its U.S. stores, the move spoke less to Apple's persuasiveness and more to the fallout of the country's ongoing shift to EMV security.
The EMV migration runs counter to everything Starbucks has done with mobile at the point of sale. Starbucks has famously shortened lines and wait times by convincing a sizeable chunk of consumers to pay with its mobile app. But the EMV payment process, which requires consumers to leave a card in a reader until the transaction is complete, threatens to undermine those results.
"EMV cards, what a mess," said Mary Monahan, an executive vice president and research director with Javelin Strategy & Research. "The more people they can get paying with mobile, the faster their lines will move."
Given that an Apple Pay transaction doesn't require any app to be launched for a purchase to be processed, the Near Field Communication-based mobile wallet could prove to be even faster than the Starbucks mobile app, which uses a bar code displayed on-screen.
Starbucks "will get potentially an increase in satisfaction from those who may or may not enjoy the friction of (its own) app," said Aite Group Senior Analyst Thad Peterson.
Starbucks' mobile payment app has been fiercely successful, accounting for one out of every five Starbucks transactions. Starbucks gift cards were the No. 1 holiday gift last year.
Another key factor in the Starbucks decision is loyalty and coupons and what role Apple will play. Very few details were released, although analysts did note that it was an Apple executive—as opposed to one from Starbucks—who announced the move. Will Apple, for example, automatically detect when someone is inside a Starbucks and automatically launch the Starbucks app? If so, that could be another huge reason for Starbucks to support the move.
"There is no single payment type that rules them all," said Richard Crone, president of Crone Consulting. "What is not being released here is the potential for a deep link, to get credit for (Starbucks) loyalty."
Another consideration, given the coffee chain's recently launched order-ahead app, is whether Apple Pay support would convert some card-not-present transactions into lower-cost card-present ones.
"The problem with the (Apple Pay) in-app payment as it stands today is that Visa and MasterCard and Discover are still applying card not present rates," Crone said. "And that is a little hard for Starbucks to swallow."