Mobile Payment Apps – A Starbucks Case Study

Being a relatively new father, I’ve gone from being a non-coffee drinker to a Starbucks Gold Card member.  So when I first found the Starbucks iPhone app, it was an app that gained instant placement on my first screen, a designation that is hard to come by with all the apps I tend to use.  To this day, it’s one of my more frequently used apps and I’ve always been impressed with the simplicity of the user interface, with one exception, which I’ll get to later in this post.

When Starbucks enabled mobile payments nationwide in mid-January, it was an exciting feature I was looking forward to using.  After all, mobile payments have been all the buzz for a while, and they appear to be on the cusp of mass market availability — NFC chips have recently been found in Android based devices and are projected to be embedded in handsets during 2011.

While the Starbucks implementation via a QR code enables a “mobile payment”, it is not really what mobile payments are all about.  Mobile payments are suppose to enhance the customer experience of the paying process, but if you take a look at the customer experience of the Starbucks mobile payment, it’s not quite there yet.  You could argue that the time it takes someone to pull out their phone, launch the mobile app, and give the phone to the barista is less efficient than simply giving them your traditional payment card.

Beyond the transaction time, one of the promises of mobile payments (particularly with 2-way technology like NFC) is to provide instant loyalty rewards as soon as a customer completes a transaction that qualifies them for an award.  Again, with the QR technology that Starbucks has implemented, the customer experience has room for improvement.

First, it appears that Starbucks uses some type of overnight batch processing to ingest and process purchase information that is used to update loyalty points.  Thus, customers need to wait a day in order to see their current reward balance.

Second, once the app reloads their current loyalty point balance and the customer has earned a reward, a message appears telling them that their free drink will be sent via mail.  Snail mail? What?  It’s surprising that there is no way for customers to use their reward via the app that now lets them pay for their drinks.  I’m sure there are fraud concerns driving this to prevent people from using it multiple times in a day, but there must be ways around this.  For example, they could require a customer to have sufficient funds on their loyalty card to cover the cost of the drink, thus debiting their account overnight if a customer tries to use the free drink reward multiple times.  Maybe there are cleaner solutions.  The point is that users want instant gratification, and Starbucks should be providing that.

Finally, the security choices of the app are a bit puzzling.  This recent article from Mobile Marketer reports on a way someone can steal your QR code without you knowing.  As I alluded to earlier, I am impressed with the simplicity of the app, but the one issue I have never understood is why I need to enter in my password to see my current (err, somewhat current) reward balance.  What would someone do with that information?  And as the article mentions, Starbucks does not require a password to actually use the app to pay for a drink.  Bizarre choice of where to enable security.

Overall, the app still provides a lot of utility for me and will be tough to push out to my second screen. And kudos to Starbucks for being one of the first mass market brands to dabble in the mobile payments space.  It certainly provides a case study on the infancy of mobile payments, and I’m looking forward to seeing how NFC can truly improve customer experiences at retail checkout counters.

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Written by:
Anuj Agrawal (@anujagra) is a digital media enthusiast in the DC area, with a passion for understanding what makes consumers tick. From the fundamentals of designing products that are engaging to understanding the psychology of the buying process, he has helped companies develop innovative consumer experiences.
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