CLOSED-LOOP MOBILE PAYMENTS

of transactions at company-owned U.S. stores come

through the app

25%2016

2016

Active Members

12M

Launched the Mobile Payment using barcode

2009STARBUCKS APP

orders were placed through mobile devices

in U.S.

7M

STARBUCKS MOBILE PAYMENT APP SUCCESS

TRENDS IN CLOSED-LOOP PAYMENTS

“ ”No single competency is enabling us to elevate the Starbucks brand more than our global leadership in mobile, digital, and

loyalty. Starbucks is a clear leader in mobile payments and we are encouraged by how consumers have embraced mobile apps as a

way to pay. -Howard Schultz, 2013

There are two elements to this strategy: a closed-loop

electronic check card and a loyalty rewards program.

The approach uses a new merchant-branded closed-loop payment card in

which the loyalty or membership card issued by a merchant is linked to the

customer’s checking account. In effect, the loyalty card becomes a payment card.

- Reload balance from: - Paypal - Apple Pay - Credit Cards - Visa Checkout - Gift Cards

- Walks to a store - Place an order - Pays using app by holding up the on-screen

barcode to the reader

SourceofFunds

BarcodePOSWalletApp

MOBILE PAYMENT APP: HOW DOES IT WORK?

Customers Steps

MoneyFlow UX

• Source:

• Apple Pay

• Credit Card

• Gift Cards

• Flow

• Form any of the sources, the

funds are loaded in the

Starbucks cloud.

Loading Funds Loading FundsTransaction

• Money is transferred from the

cloud to the merchant once the

transaction is approved

Transaction

• Launch the App

• Select Pay

• Select Reload

• Select “Paying with” (Optional*)

• Under Payment Methods select:

• Credit Card

• PayPal

• Visa Checkout

• PayPal

• Add a new method of payment

• Select Reload

* This step is optional if the default method is

used

• App

• Launch App

• Select Pay

• Align the phone (barcode) under

the barcode reader.

• Completed

• Wallet

• Double Tap Home Button

• Tap on Passes

• Select Starbucks Card

• Hold up the on-screen barcode to

the reader.

MOBILE PAYMENT APP: HOW DOES IT WORK?

In a general sense, closed-loop mobile payments are those that enable consumers to load money into a spending account that is linked to a payment device – for example, a mobile wallet for a specific company.

Maintains ownership

Electronic payments are processed through the merchant system bypassing

card transaction fees.

Lower payments processing fees

Enables capturing big data on customer transactions,

including customer insights buying habits, popular items,

and even an ROI measure on marketing campaigns

Data Analytics

Easy to reward customers for loyal purchases 

Improves Loyalty Closed-loop systems offer merchants the ability to maintain

ownership over the the entire merchant /customer process

$

BENEFITS OF CLOSED-LOOP PAYMENT

ECONOMY OF STARBUCKS MOBILE PAYMENT

0

15

30

45

60

Credit Card Closed-Loop

$ 6 1 M

Average Food, Coffee Bean and Merchandize spend per customer

Assumptions:

$ 5 . 5 M$2.2

Credit Card Transactions (Preload/Direct transaction)

$0.15

Quarterly Revenue from mobile purchases (25% of transactions)

$900M

Estimated direct savings by using Closed-loop system

$56M

Starbucks Mobile payment savings:

EXPANDING ON THE SUCCESS OF STARTBUCKS

2009STARBUCKSLaunched the first mobile payment

app, and became leaders in mobile

commerce.

2011

ALIPAYAlipayunleash the new mobile

barcode payments feature

2012

DUNKIN’ DONUTSDunkin' Donuts offers mobile

payment app.

TRENDS IN CLOSED-LOOP PAYMENTS

Some examples of Barcode Payment

https://flomio.com/?p=57560

https://flomio.com/2017/01/trends-on-closed-loop-payment/

CURRENTCAconsortiumofU.S.retailcompaniesdevelop

amerchant-ownedmobilepaymentsystem.

TIM HORTONTim Hortons rolls out mobile

barcode payments across Canada

and USA

ZAPPERPoint-of-sale systems automatically adds

a QR code to the bottom of a bill that can

be scanned using an app

2012

2014

2014

TRENDS ON CLOSE LOOP PAYMENTS

Some examples of Barcode Payment https://flomio.com/2017/01/trends-on-closed-loop-payment/

WalmartWalmartlaunched“WalmartPay”

SPEEDPASS+the app that let users pay for gas and car

washes using smart phone exclusively at

Exxon- and Mobil- branded stations

CVSCVSPharmacylaunchesitsownmobile

paymentsandloyaltysolution

2015

2016

2016

TRENDS ON CLOSE LOOP PAYMENTS

The Barcode based mobile payment has accelerated in the last year

IT’S ABOUT SIMPLICITY

“ ”It’s about Simplicity ….With one scan, we’re taking away three

or four extra steps that customers have lived with for a long time.

-Brian Tilzer, CVS Health’s Chief Digital Officer told Techcrunch.

“ ”“It has to be more than just

payments,”

“ ”What we’re trying to do is

provide real utility and solve real problems for customers

using digital.

“ ”The value is in combining a couple of these things…

and the examples in the market where that has happened have worked really well.

The Barcode based mobile payment has accelerated in the

last year

TRENDS IN CLOSE LOOP PAYMENTS

WHY?

RESPONDING TO

APPLE PAY

STORES BENEFIT

FROM LOYALTY

SIMPLICITY (ONE SCAN

TWO ACTIONS)

01

02

03

01

02Inexpensive

Fast adoption

Simple ecosystem Barcodes are simple to

print or to generate and display on a phone screen. Barcode readers are also

inexpensive.

All smartphones are capable of reading or displaying a barcode.

Familiarity with Barcode is high: 83% of North American consumers are aware of QR

codes

Barcode ecosystem is simple and proven. It does

not require many stakeholders.

User Experience

SecurityBarcode transactions present a high level of

friction. It takes more steps to create a bar code than

tapping with NFC.

Barcode can be easily replicated by taking a screenshot or taking a

picture of the screen and used

ADVANTAGES DISADVANTAGES

MAIN DRIVERS OF THE BARCODE POPULARITY

03Speed

Barcode transactions are slow to execute

DEATH OF THE BARCODE

PRIORITIZING THE USER EXPERIENCE

01

02

03

01

02Expensive

Slow adoption

Complex ecosystem

MYTH: NFC tags and readers are

becoming very inexpensive.

MYTH: ADOPTION

1.9 billion phones estimated world wide by

2018. 76% of users are very

satisfied using NFC, vs. 53% using QR

The backend ecosystem can be shared between

Barcodes and NFC. The only difference is the

reader. User Experience

SecurityContactless transaction is much more frictionless than

the barcode counterpart. NFC has faster time to

checkout.NFC is a more robust

solution and definitely more secure

NFC MYTHS ADVANTAGES

BENEFITS OF NFC

03THROUGHPUT

NFC transactions are at least twice as fast when

compared to Barcode

Funds Source ContactlessmPOS

RetailCloud Service

AppleWallet

CLOSED-LOOP PAYMENT USING CONTACTLESS

- Customer reload balance from: - Paypal - Apple Pay - Credit Cards - Visa Checkout - Gift Cards

- Walks to a store and place and order - Pay using app by using contactless (Payment

and Loyalty card transaction) - Funds are transfer from the retail cloud

service to the merchant.

PayattheStoreMasterPass orVisaCheckoutWallet

StoreReceivesMoneyConfigure andselectdefaultcreditcard

CLOSED-LOOP PAYMENT: ALTERNATE SCENARIO

- Customer selects credit card wallet to use: - VISA Checkout - MasterPass

- Walks to a store and place and order - Pay using app by using contactless (Payment

and Loyalty card transaction) - Funds are transfer from the default credit card

service to the merchant. - The transaction is just like a regular credit

card transaction, although is considered Card-Not-Present

CLOSED-LOOP PAYMENT: ALTERNATE SCENARIO

Funds Source AppleWallet ContactlessmPOS

CarrierBilling

CarrierCloudService

“Carrier Billing”- The funds are either extracted from Carrier Credit

(Prepaid) or added to the carrier billing. - Walks to a store and place and order - Pay using app by using contactless- Funds are transfer from the carrier user’s

account to the merchant.

TaptoStartTan

CreditCardsOrApple Pay

StoreReceivesMoneyConfigure andselectdefaultcreditcard

TaptoCompleteTab

CLOSED-LOOP PAYMENT: ALTERNATE SCENARIO

“Bar Tab”

- User Taps for every drink - Patron credentials are stored on First Tap

- Drinks are added as they occur - Bill is consolidated on the last tap

Higher App usage -> Higher mobile transactions -> Increase per transaction savings

Friction

Enhance the 'buying experience' by making payments simple.

Buying Experience

86 % of consumers avoid stores with long queues.

It takes consumers less time to complete transactions

using NFC than any other technology. (estimated savings:

30 seconds)

Reduce Long Queues

Reduce App abandonment

23 percent of users abandon mobile applications

after only one use

Increase loyalty 

Improve App usage Remove as much friction as possible from the payments process to

eliminate consumer frustration. Increase throughput

$

BENEFITS OF NFC-BASED CLOSE LOOP PAYMENTS

BackupThank You!

41

Search and Select Starbucks App

Select Pay

2

Select Pay one more time

Present it to the barcode reader

3

4 STEPS TO PAY USING BARCODE (FROM APP)

41

Double tap to select Apple

wallet

Select Passes

2

Select Starbucks Pass

Present it to the barcode reader

3

4 STEPS TO PAY USING BARCODE (FROM WALLET)

4 STEPS TO PAY USING BARCODE

https://www.youtube.com/watch?v=cwsWpdDrwpI

Open, Scan, Done – It’s That EasyCheckout using Walmart Pay happens in three easy steps:

Open: Visit any register, open the Walmart app and choose Walmart Pay. Activate the camera.

Scan: At any time during checkout, simply scan the code displayed at the register. Walmart Pay is now connected.

Done: Associate scans and bags the items… and it’s done. An eReceipt will be sent to the app and can be viewed at any time.

1 2

3

4

1

2

2 STEPS TO PAY USING NFC

Place near the reader Pay and

exchange loyalty credentials in just

2 steps.Place your finger

on the home button

0%

6.5%

13%

19.5%

26%

Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16

Starbucks Card, Loyalty & Mobile Dashboard

Mobile Transactions as % of Total Transactions (US Company-Operated Retail Stores Only) Source:StarbucksinvestorrelaCons.StarbucksCoffeeCompany-StarbucksCard,Loyalty&MobileDashboard(Oct’16)