Starbucks pushes Visa co-brand, mobile pay to fuel growth

Starbucks executives did not deliver growth numbers on its Mobile Order & Pay smartphone app during a Nov. 2 fourth-quarter earnings call, but did give it high enough marks to be confident the service will soon be available to all of its customers.

In addition, Starbucks president and CEO Kevin Johnson said the company will offer customers a co-branded Visa credit card this winter that will tie into receiving Starbucks rewards with purchases in and out of Starbucks stores. The card represents the first new product with Chase since the companies agreed early in 2016 to make Chase Pay part of the Starbucks app when it became available.

A previous branded Visa card through Starbucks and Chase debuted in 2003 under the name of Duetto, but it shut down in 2010.

Bloomberg News

During the second quarter of 2017, which ended July 2, Starbucks had indicated mobile payment transactions in all U.S. stores had reached 30% of sales, or a 2% increase over the second quarter. In addition, the Mobile Order & Pay app grew to 9% of the quarter’s transaction, a modest increase over the 8% it delivered in the first quarter.

During the earnings call for the fourth quarter, which ended Oct. 1, Johnson cited positive customer experience scores for the mobile payment app and its growing use during peak service hours, but he mostly sang the praises of the Starbucks Rewards membership in the U.S. rising 11% year-over-year. With that, Starbucks enjoys 36% of its tender coming from Starbucks Rewards, he added.

Such strong numbers make the new branded Visa credit card an important part of the mix. Plus, Johnson said, a prepaid Visa card that had been touched on previously by executives would be issued not long after the credit card product is available.

“Both products will afford options, a very rich rewards proposition for people who spend on credit, and the unique store-value product offering rewards for customers who prefer debit,” Johnson said.

Still, Starbucks understands the power of its digital products, having long been the poster child for how a mobile payment app can resonate with customers.

Calling digital “predictable and powerful,” Johnson said the company will make Mobile Order & Pay, a perk for loyalty members, available to customers who are non-loyalty members at Starbucks.

“That will be another powerful driver of confidence” for the company as it strives to deliver solid results in future quarters, he added.

“In quarters ahead, all customers will be able to download our app, set up a digital relationship with Starbucks, select the payment vehicle of their choice — and use Mobile Order & Pay,” Johnson said.

Such a scenario represents the first of many initiatives that will combine “direct and digital relationships with new value propositions in order to expand the total universe of customers with whom we engage and communicate,” Johnson added.