Starbucks is going to change the way you pay for coffee — and maybe other stuff

Cup of Starbucks coffee

Starbucks just announced that it’s teaming up with Square to process the coffeehouse’s credit card payments and make purchases with its smartphone app.

Until now, Square has mostly been known for the little white box it invented that attaches to phones and allows individuals and small businesses to swipe and accept credit card purchases.

But the Square app turns your phone into a mobile wallet capable of paying bills at any business signed up for the service.

When Starbucks starts accepting the Square app, customers will have to show baristas a bar code on their phone to identify themselves.

Once it’s fully functional, their phones will automatically announce their arrival at any of the coffee chain’s 7,000 U.S. stores.

The customer’s photo will pop up on a screen at the counter, so that all they have to do to pay is provide a name. The barista will confirm their identity from the photo and process the purchase.

The smartphone never needs to leave a purse or pocket.

This is the future folks, and not in some far-out sci-fi way.

It’s also going to make it less expensive for Starbucks — and other businesses who follow its example — to process payments.

Accepting credit cards has been an onerous expense for business owners — an expense that’s passed right on to their customers.

The traditional method for processing electronic payments required them to buy or lease expensive equipment and sign long-term contracts with each credit card company, which never turns over all the money collected right away.

As we move closer and closer to a cash-free society, Square is emerging as an affordable alternative.

Starbucks recognized that it could save big bucks processing its electronic payments through Square and was a natural partner for its mobile app.

The coffee chain already has an app that allows customers to pay with their smartphones, and they’ve responded by making a million mobile purchases every week.

(You’ll still be able to use the Starbucks app. Square will just be another option.)

Look for many businesses to follow Starbucks example.

While this is being called a death knell for cash, it's also the first big step in breaking stores and restaurants away from traditional credit card processing agreements.

I’m not saying your Cinnamon Dolce Crème Frappuccino will cost less because of this.

But partnering with Square will definitely reduce Starbucks’ cost of doing business.

Let’s hope the Seattle-based company will pass some of that savings along to us.

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