Slideshow In Pictures: Starbucks' Rocky Relationship with Square

Published
  • October 16 2015, 10:41am EDT
8 Images Total

Starbucks and Square, once the hottest couple of the payments world, are splitting up. But their relationship was never perfect; signs of trouble were obvious from the very start.

Sidelined Square's Hardware

Unlike most Square merchants, Starbucks never used Square's hardware or its Register app in its stores. The decision undermined Square's claim that its Register tech could function as a full replacement for a point of sale system.

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Customer Confusion

Starbucks did, however, accept Square's Wallet app. But the system added unneeded complexity to the purchasing process, causing some bad publicity. Starbucks had to educate its staff and recalibrate its scanners to accommodate Square's technology.

Short-Lived Board Stint

When Starbucks began its relationship with Square in 2012, part of the agreement involved putting Starbucks CEO Howard Schultz on Square's board. Schultz left just a year later, handing the seat over to former Goldman Sachs CFO David Viniar.

Ignored Square Order

One of the latest innovations in Starbucks' mobile payment strategy was adding order-ahead services to all of its U.S. stores. Square already had such a capability in its Square Order app, but Starbucks chose to build its system without Square.

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Choosing Sides

Starbucks' decision in early 2015 to support Apple Pay within its app was a slight to Square, which never got similar treatment despite having a years-long relationship with the coffee chain, which is also a Square investor.

Muddy Math

Square had its own reasons for being frustrated with the Starbucks relationship - it was losing money. In its IPO filing, Square reported Starbucks transaction revenue at $123 million for 2014, but reported transaction costs at $151 million. The companies have already agreed not to renew their processing agreement when it expires in the third quarter of 2016.

Saw It Coming

It was clear from the start that the math wouldn't add up for Square, with the deal seen as more of a marketing move than an effort to earn money. When rumors surfaced last year that Square was seeking a buyer, some wondered if the company would appeal to sellers once they got a glimpse of Square's financials.