Jack Dorsey: Today Starbucks Signed up for Square • Hacker News Board

Re: Jack Dorsey: Today Starbucks Signed up for Square

#111

Post by dagw » Wed, Aug 08, 2012, 11:33 AM UTC

mikenon wrote: post #101

ivancdg wrote: post #93

Earlier quoted context omitted.

Here in France, people use debit/credit cards to buy EVERYTHING. Some merchants discourage this by insisting on a 15 euro minimum charge. But by and large cards are used more often than cash. In restaurants it is common to split the payment of the meal and have each person contribute via a card. It's been that way for years, although the frequency of card use is not as overwhelming as in the US. At the supermarket, i…

In the US charging a minimum for card transactions is usually a violation of your contract with Visa/Mastercard, and possibly a violation of the law in 10 states [1]. Are there similar contracts or laws in France? [1] http://usa.visa.com/personal/using_visa/checkout_fees/

Here in Sweden you're not allowed to charge any sort of additional surcharge, but you are allowed to simply refuse accepting payment with Visa/Mastercard for purchases under a certain amount.

Re: Jack Dorsey: Today Starbucks Signed up for Square

#112

Post by seabee » Wed, Aug 08, 2012, 11:34 AM UTC

stonemetal wrote: post #110

bigiain wrote: post #50

Earlier quoted context omitted.

"I would assume that a majority of that revenue is through a card." Really? I almost never use a card for café type purchases. Maybe if I were buying a meal, but for a coffee or two I'm 99% likely to use cash. (Note: mine is an Australia-centric view, perhaps things really are very different in the USA?)

My wife actually thinks it is rude to pay with cash or check when people are waiting behind you in line. Cards are the fastest way to pay, you don't even have to sign for purchases under a certain amount.

You don't enter a PIN? That process easily makes it take longer than cash.

Re: Jack Dorsey: Today Starbucks Signed up for Square

#113

Post by ry0ohki » Wed, Aug 08, 2012, 11:42 AM UTC

kayoone wrote: post #85

jevinskie wrote: post #44

Earlier quoted context omitted.

"Square will process Starbucks U.S. credit and debit card transactions": Wikipedia says that Starbucks has $11.7 billion in revenue every year. I would assume that a majority of that revenue is through a card. I am not familiar with Square's revenue but I feel that this will at least double their transactions. Am I correct?

Here in Europe (Germany) i have never seen anyone buying a coffee with a credit card. Maybe debit card, but that also is rare, its mostly cash for these small transactions. Most coffee shops dont even take any cards at all, even here in germany!

In Pittsburgh, 90% of the businesses that take Square are coffee shops for whatever reason

Re: Jack Dorsey: Today Starbucks Signed up for Square

#114

Post by ry0ohki » Wed, Aug 08, 2012, 11:43 AM UTC

jcdavis wrote: post #2

Wow, huge deal for Square. I'm very curious what the terms of the deal are: presumably Starbucks isn't willing to pay much more than what their current processing fees are (maybe a tiny bit more for the premium of being able to use Pay with Square?), so Square must be losing a decent chunk of change in exchange for the huge marketing and growth this gets them.

Starbucks is very good at staying on the cutting edge. They were one of the first to offer FourSquare specials, iTunes credits, and they seem to partner with just about any semi-relevant startup out there.

Re: Jack Dorsey: Today Starbucks Signed up for Square

#115

Post by abalone » Wed, Aug 08, 2012, 11:44 AM UTC

Here's what's in it for Starbucks: Square's cheaper.

Square loses money on transactions below $6. The reason is for the sake of simplicity they waive the per-transaction fee that Visa/Mastercard charges them and just charge a flat percentage of 2.75%. But even though this is a relatively high percentage, it's not enough to recoup the cost of the per-transaction fee at low transaction sizes.

Take a $2 coffee charged to a Visa credit card. Visa charges Square 1.76% + 6 cents, or 9.5 cents. But at 2.75% Square only collects 5.5 cents.

So even if Starbucks was already paying wholesale Visa/Mastercard rates, they'll save 4 cents or more a cup thanks to Square's "simplicity subsidy".

Now multiply that by a few billion cups. Starbucks saves millions, and Square is happy to pay it to drive their growth into the stratosphere.

Source: http://feefighters.com/blog/can-square-make-money-with-its-n...

Re: Jack Dorsey: Today Starbucks Signed up for Square

#116

Post by jusben1369 » Wed, Aug 08, 2012, 11:55 AM UTC

abalone wrote: post #115

Here's what's in it for Starbucks: Square's cheaper. Square loses money on transactions below $6. The reason is for the sake of simplicity they waive the per-transaction fee that Visa/Mastercard charges them and just charge a flat percentage of 2.75%. But even though this is a relatively high percentage, it's not enough to recoup the cost of the per-transaction fee at low transaction sizes. Take a $2 coffee charged t…

I would point out that it's unlikely SB's received the same financial terms offered to Mom and Pop vendors who sign up via the website.

Re: Jack Dorsey: Today Starbucks Signed up for Square

#117

Post by jusben1369 » Wed, Aug 08, 2012, 12:00 PM UTC

The initial advantage Square had was “green fields” Most of their customers didn’t accept Credit Cards so they did not have incumbency issues. That’s what makes this win impressive. However, it also highlights just what Square has to go through to win a very large account. SB’s had to agree to tear out and replace their existing POS system. That’s a big risk, headache and cost and customers will use that leverage (and genuine pain) to drive hard bargains.

Also worth noting is that SB’s mentions processing costs will be cheaper. It’s hard for me to imagine that SB was overpaying with their last vendor so I worry about the economics on this deal. Maybe it’s the anchor tenant though that allows for additional enterprise deals to follow so is worth it. I can imagine other large retail organizations that had any interest were on the sidelines saying "It's one thing to service 10,000 food trucks but come on!" They'll stand up and listen now with this.

Re: Jack Dorsey: Today Starbucks Signed up for Square

#118

Post by twoodfin » Wed, Aug 08, 2012, 12:02 PM UTC

mikenon wrote: post #101

ivancdg wrote: post #93

Earlier quoted context omitted.

Here in France, people use debit/credit cards to buy EVERYTHING. Some merchants discourage this by insisting on a 15 euro minimum charge. But by and large cards are used more often than cash. In restaurants it is common to split the payment of the meal and have each person contribute via a card. It's been that way for years, although the frequency of card use is not as overwhelming as in the US. At the supermarket, i…

In the US charging a minimum for card transactions is usually a violation of your contract with Visa/Mastercard, and possibly a violation of the law in 10 states [1]. Are there similar contracts or laws in France? [1] http://usa.visa.com/personal/using_visa/checkout_fees/

That's about checkout fees, not minimum charge amounts. Minimum charge amounts used to be forbidden by basically every merchant agreement, but thanks to Dodd-Frank and a lot of retailer lobbying, such contact terms are now illegal. Card issuers must allow a restriction on charge amounts (no more than $10 IIRC) if the retailer so desires.

Re: Jack Dorsey: Today Starbucks Signed up for Square

#119

Post by abalone » Wed, Aug 08, 2012, 12:09 PM UTC

jusben1369 wrote: post #116

abalone wrote: post #115

Here's what's in it for Starbucks: Square's cheaper. Square loses money on transactions below $6. The reason is for the sake of simplicity they waive the per-transaction fee that Visa/Mastercard charges them and just charge a flat percentage of 2.75%. But even though this is a relatively high percentage, it's not enough to recoup the cost of the per-transaction fee at low transaction sizes. Take a $2 coffee charged t…

I would point out that it's unlikely SB's received the same financial terms offered to Mom and Pop vendors who sign up via the website.

Maybe, but they wouldn't need to for the deal to be attractive. Square's regular rate is already below wholesale processing for small transactions.

Re: Jack Dorsey: Today Starbucks Signed up for Square

#120

Post by jusben1369 » Wed, Aug 08, 2012, 12:21 PM UTC

abalone wrote: post #119

jusben1369 wrote: post #116

Earlier quoted context omitted.

I would point out that it's unlikely SB's received the same financial terms offered to Mom and Pop vendors who sign up via the website.

Maybe, but they wouldn't need to for the deal to be attractive. Square's regular rate is already below wholesale processing for small transactions.

The largest retailers though can negotiate less than wholesale. But you raise a point. What attracted SB's to the deal? Lower transaction fees or incremental sales due to a simplified paying process? It can be both but it's probably not 50/50. I suspect one was the driver and the other gravy.