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Dunkin Donuts is following in the footsteps of rival Starbucks(s sbux) with the launch of its first mobile app, allowing users to pay for coffee and donuts with their smartphone. The app, available for iOS (s aapl) and Android (s goog), creates a virtual Dunkin Donuts card, which can be filled by transferring the value of an existing physical Dunkin Donuts Card or it can be funded through a credit card or PayPal (s ebay) transaction in the app.
When it comes time to pay, users select which virtual card they want to use and the app presents a QR code, which is scanned by an employee. The amount is deducted from their balance immediately after the purchase.
Dunkin Donuts’ mobile payment system, which is available at most of its 7,000 U.S. locations, is similar in execution to the Starbucks mobile app, which also works with virtual cards and barcodes. But unlike the Starbucks mobile app, Dunkin Donuts users can also send mobile gift cards to each other via the app. Users can send a gift card up to $100 to a friend via Facebook (s fb), email or text message. The app also provides menu and nutritional information plus a tool for finding a nearby Dunkin Donuts.
I just tried the app out and the payment system worked just as smoothly as any Starbucks mobile transaction. I just opened the app, tapped on my virtual card and was ready to be scanned. I was told by an employee that the handheld scanners first appeared in the stores about two or three months ago.
It’s not surprising that Dunkin Donuts is moving into mobile payments. Starbucks CEO Howard Schultz said last week that the company had 60 million mobile transactions in the last year and a half since it launched mobile payments. Now, a quarter of Starbucks transactions happen via Starbucks cards with a growing percentage of that quickly shifting to mobile. Schultz said the adoption of mobile payments is the fastest he’s seen of any product in the last 40 years. That’s partly why Starbucks invested $25 million in Square and announced it would soon enable Square payments in its locations.
Getting people to pay via a mobile app may provide some check-out convenience for customers of Dunkin Donuts, though it’s probably negligible. I didn’t see much speed improvement over cash or credit though it was nice to pay without having my wallet with me. But moving to mobile payments also gives Dunkin more insight into the purchase habits of its users and allows the company to build a closer relationship with its customers. And by enabling gifting right from the mobile app, Dunkin Donuts is making it easy for people to buy more gift cards.
The Dunkin Donuts announcement comes one day after Target(s tgt), Walmart(s wmrt) and a dozen other retailers announced plans for their own mobile wallet system. It’s a reminder that many merchants are realizing that mobile payments is something they want to control themselves. That could have a big impact on the growing number of mobile payment systems that are emerging like Isis and Google Wallet.