There are a lot of promising companies in the bitcoin space, but if you ask me which firm digital currency startups should be watching, it’s Starbucks. Why a coffee retailer? It’s simple; they are the leader in the US mobile payment space. It may sound counterintuitive to pay much attention to a coffee company, but if you are aiming to disrupt the payment industry, than why not watch what the leaders are doing.
Kings of Mobile Payments?
There is a lot of debate whether Starbucks coffee is really that good (I happen to like it, so if you read into any biases you know why). But, one thing that is hard to debate is the success they have had with their 2011 launch of mobile based payments, via iOS and Android apps. The apps are a mobile version of their Starbucks card, where users credit their cards or mobile based account and use it to make purchases in the coffee shop’s stores.
Recently, we’ve gotten a glimpse at just how well the mobile app has performed. In a recent study by Berg Insight of US based mobile payments in 2012, it was found that the entire market amounted to only $500 million, with around 50% of purchases transacted using the Starbucks app (see GigaOM article). In addition, during the company’s recent earnings report, Adam Brotman, Starbucks Chief Digital Officer stated during the conference call that 10% of its US based transactions are via a mobile device.
Cryptocurrencies! The Wake-Up CallGo to article >>
Secrets of their Success
So what’s Starbucks doing that has made them the leader of the mobile payments pack, that is filled with new entrants every day and includes technology giants, banking superpowers, and innovative payment companies like Google, Bank of America, Dwolla, and Paypal?
When it comes to payments, the average person wants a simple, efficient transaction. In the world of brick and mortar stores, credit cards have filled this role, and serve the needs of 99% of our payment demands. Now there may be more efficient and cheaper solutions to replace credit cards, such as through the use of bitcoins or other digital currencies. However, the simplicity and familiarity of credit cards keeps their use firmly entrenched for at least the next five years.
Similarly, the Starbucks app, takes a simple transaction of using a prepaid card to buy food and beverages at a familiar store and ‘mobilizes’ it. Once crediting the app, there aren’t worries of which retailers will except it, as there is pretty much a Starbucks in close proximity to 99% of the US population (at least if feels that way), as well as the uniformity of the product creates trust for consumers. As such, just like consumers feel confident leaving the house with just their credit card and trust that they can do all their shopping with it, Starbuck leverages their consistent product and wide-scale store presence to deliver a similar type of simple and efficient experience for its mobile customers.
Bringing this back to bitcoins. Regardless of the innovation and technology involved with bitcoins, they are simply a payment solution. That being said, bitcoin competes against the simplicity and comfort zone that customers experience with existing payments products. Therefore, when it comes to creating bicoin related products, firms creating products need to keep in mind the user experience. Specifically, they must take into account that potential users will question whether migrating to bitcoins is worth the hassle when compared to their existing payment solutions. In addition, just like Starbucks user have clear knowledge of where their mobile card will be accepted; bitcoin firms can copy this page by promoting the wide variety of shops accepting the digital currency.