Square bails on Wallet app in latest fallout from troubled Starbucks partnership

 

squareorder2Square, the San Francisco-based mobile payments company, is changing course in a major part of its business — giving up on its Square Wallet application and focusing on a new service that allows consumers to place orders in advance.

The new direction for the company seems to be the latest outcome of a botched investment and business arrangement with Starbucks.

As of today, Square is yanking its Wallet app from the Apple and Google app stores, Re/Code reports. The app was designed to allow customers to store their credit card information and pay by giving the cashier their name at the register, making the checkout experience more personable and less clunky.

square-cardBut by pulling the app from the stores today, Square finally admits that it never took off.

While Square did do a good job of acquiring small merchants, who were looking to ditch their registers in favor of using an iPhone or iPad, it was never able to change behavior on the consumer side.

Part of the blame could be placed on Starbucks, which never promoted the app as it had promised.

Two years ago, when the deal was first inked, Starbucks promised not only to make a hefty investment in the startup, but also to provide free promotion by placing Square’s directory of business inside the Starbucks mobile app, as well as its in-store digital network, which pops up when you use WiFi inside one of its cafes.

That part of the deal never came to fruition, a Square spokesman tells GeekWire.

At the time of the deal, Square’s Founder Jack Dorsey had said promoting the app was a cornerstone of the deal: “When Starbucks builds the Square Directory into their apps and in-store Digital Network, it gives Square new visibility, driving more customers to opt-in to Square,” he wrote in a letter.

We reached out to Starbucks to find out why this never occurred and will update the story if we hear back.

This is only the latest sign that the partnership between the mobile payments company and the coffee titan has run its course. As we previously reported, the deal is costing Square millions (at least $20 million in 2013 alone), and Starbucks is content with how well its doing on its own. And why shouldn’t it be? More than 14 percent of all Starbucks transactions in U.S. stores are now made with a mobile device.

When I asked about the two companies’ dealings in the past, a Starbucks spokesperson was reluctant to say that things were over, “when, in fact, Square remains an important strategic partner for Starbucks and we continue to partner together on initiatives stemming from our original agreement.”

In any case, it appears Square is moving on, too.

Today, it unveiled Square Order, which lets you place orders from restaurants nearby, pay for it in advance, and then get a pinged when it’s ready. 

However, that’s a tough business with lots of other companies competing for ordering and delivery services, such as Seamless or GrubHub. It’s also a service that only makes a lot of sense for busy restaurants or big cities, where people are strapped for time. Sure enough, Square is initially rolling it out in New York and San Francisco.

Merchants will have to decide whether it’s worth it to participate because Square will be charging an 8 percent pick-up fee, which is much higher than the standard 2.75 percent it charges for credit card transactions.

We may be reading too much into this, but Square posted one screenshot on iTunes for Square Order depicting a scenario in which a customer orders a latte and bagel from Strauss Coffee (Strauss….Starbucks? A coincidence?).

 

Square's new Order application lets you place orders in advance.

Square’s new Order application lets you place orders in advance.

  • Coffeevines

    This makes me remember their setup with twitter. How is that working out? The on where you order a drink via tweets? I was think about that for my single cup coffee business.