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Originally published August 7, 2012 at 9:01 PM | Page modified August 8, 2012 at 6:38 AM

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Starbucks to offer new cellphone-pay option via Square

People can register their debit or credit cards with San Francisco-based Square, then use their cellphones to access those cards when they pay.

Seattle Times business reporter

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Starbucks is partnering with a Bay Area company called Square to save money on credit- and debit-card interchange fees and to give customers a second option for paying for their lattes by cellphone.

Customers who have Starbucks cards already can deduct money from them using a Starbucks app on their cellphones in the U.S., Canada and the United Kingdom. That app launched in January 2011, and handles more than 1 million transactions each week, said Adam Brotman, Starbucks' chief digital officer.

Beginning this fall, customers will be able to use debit and credit cards as well, when Starbucks becomes the largest retailer to accept payments via "Pay with Square."

People register their cards with San Francisco-based Square, then use their cellphones to access those cards when they pay.

Starbucks-run sites

The "Pay with Square" option will be available only at U.S. locations run by Starbucks.

That means it excludes most shops in airports, grocery stores, and other such establishments.

Square also will become Starbucks' processor for U.S. debit- and credit-card transactions, even when a card is swiped manually. It will charge Starbucks lower fees on those transactions than the company currently pays, Brotman said.

But he declined to specify how much the chain will save, saying only such fees are "significant."

Starbucks customers who use "Pay with Square" will receive more face time with baristas, Brotman said, because workers won't have to swipe cards, and customers won't have to sign receipts.

"It helps humanize the transaction," he said. "It allows them to maintain eye contact."

As part of the deal, Starbucks will invest $25 million in Square, and Starbucks CEO Howard Schultz will join its board of directors.

Melissa Allison: 206-464-3312 or On Twitter @AllisonSeattle.

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