Whole Foods Market has agreed to use multiple versions of Square Inc.'s mobile payments technology.

Seven of Austin-based Whole Foods Market's locations have begun using Square Stand and Square Register, the hardware and app Square designed to enable swiped card payments from an iPad. Some locations will also support Square Wallet, a cloud-based payment system that works through an app on the consumer's phone.

"I think Square is a very good fit because Whole Foods tries to project the image of a farmer's market and a neighborhood store," says Gil Luria, analyst with Los Angeles-based Wedbush Securities. "They are kind of borrowing the Square look that is now associated with market settings."

The fact that this Square partnership is more hardware-based at the start may represent a different approach for Square, which previously has targeted mobile payments or payment processing as key revenue drivers, Luria says. For example, Square's 2012 deal with Starbucks mainly involved payments processing and the Square Wallet app; the coffee chain never agreed to use Square's hardware to accept payments.

Whole Foods has also experimented with other mobile payments technology, including the Isis mobile wallet, which uses Near Field Communication technology to make contactless payments from certain smartphones.

"Whole Foods is an innovator in terms of technology, being one of the first to have NFC capabilities in their stores," Luria says.

Square may be betting that it will handle more of Whole Foods' payments needs as the companies' partnership develops, says Thomas McCrohan, analyst with Janney Montgomery Scott LLC.

"We are unsure of the payment volume associated with ancillary services at Whole Foods, but overall we view the strategic importance of this deal to be Whole Foods' acceptance of Square's digital wallet," McCrohan states in a research note.

Back-office payment processing is still not Square's value-proposition, but integrating mobile devices at the point of sale is, McCrohan adds. The partnership with Whole Foods has been rumored for over a year, and is another coup for Square's visibility and expansion into new industry verticals, he says.

Square's partnerships with Whole Foods and Starbucks illustrate the vendor's ability to serve larger businesses, says Square spokesperson Faryl Ury.

The companies say several Whole Foods Market locations will serve as "lab stores" to test more technology.

Whole Foods Market did not respond to requests for more information, stating it has a policy against conducting interviews with trade media because of the competitive nature of the grocery store business.

In a Feb. 11 press release, Whole Foods says it views Square as a great fit for the grocery chain's digital-savvy customer base. Whole Foods has more than 7 million followers on Facebook and Twitter combined, the company says.

The Whole Foods stores that have begun using Square's technology are in Austin, New York City, Florida and the San Francisco Bay Area.

“Whole Foods Market and Square share a focus on supporting local sellers and creating amazing shopping experiences,” Jack Dorsey, co-founder and CEO of Square, states in the press release.

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