Starbucks has partnered Square, a mobile payments start-up, to allow consumers to charge items to their credit cards using their phones. The New York Times just wrote an article about this which you can find here. This is particularly interesting to me because Alcatel-Lucent was trying to create a mobile payment solution plan in their ventures group. Yet, this is a far more difficult endeavor than you might think due to two factors:
1) The chicken and egg factor: No one will want to use the application until the stores are on board and the stores won't sign up until enough consumers are using the application
2) It takes a large network to make this possible: You are bringing together industries like internet application development, banking, telecommunications, restaurants, retailers, etc... not an easy challenge to say the least.
Yet, I am a little confused by Starbucks' plan as the vast amount of the money can be made by eliminating credit cards and their fees which Starbucks definitely pays its fair share of. Why would Starbucks want to turn every phone into a credit card machine. Better to take out the credit card machine all together. That being said, maybe they can shift the fees they pay to the credit card companies to the consumer when they roll out this plan?
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