Starbucks Coffee Co. has signed on with Square Inc. to process its credit and debit card purchases, the coffee shop franchiser said Wednesday.
As part of the deal, Starbucks pledged to invest $25 million in Square, a mobile payment platform for retailers. In addition, Starbucks CEO Howard Schultz will join Square's board of directors.
By the fall, customers will be able to use the Pay with Square mobile application to purchase their cappuccinos and lattes, said Starbucks, which competes against Green Mountain Coffee Roasters and Dunkin' Brands.
Square provides credit card reader applications for smartphones, including the iPhone, iPad and Android, to process transactions. It also offers a consumer app that lets shoppers use their phones to pay merchants.
Starbucks plans to roll out Square's technology in its 7,000 company-owned stores.
Traditionally, Square has been known as a tool for small business owners who want to accept credit card payments. The move puts the fast-growing startup into the hands of a visible large retailer, an indication that the mobile payments trend may be hitting mainstream.
"This is an epic partnership," Square Chief Executive Office Jack Dorsey said at a press event in New York.
Starbucks was an early pioneer in mobile payments. In early 2011 it launched its own phone app for in-store payments.
"Over a million people a week are using the phone to pay," Schultz said at Wednesday's event. "I can't think of anything we've introduced in the last 40 years that had this kind of adoption."
Starbucks' mobile app currently lets customers pay with a credit card or with eBay's PayPal. There are no plans to change the current app, a Starbucks spokeswoman said.
One drawback for Square is that its app is not currently integrated with Starbucks' rewards card system. That will change, Starbucks said.
"Our goal is to eventually integrate My Starbucks Rewards into the Pay with Square payment option," a company representative said.