Blog Post

US mobile wallet users spent $500M in 2012 – nearly all of it at Starbucks

Smartphone owners in the U.S. bought $500 million worth of goods and services using mobile wallet apps in 2012, according to a new report by Berg Insight. That’s just a drop in the ocean compared to the trillions of dollars in credit and debit card transactions every year, but what’s most surprising is where those mobile payments took place.

According to Berg Insight, the vast majority of in-store mobile wallet transactions occurred in a Starbucks using the coffer giant’s (s sbux) own smartphone card app. Google Wallet(s goog), Square Wallet, LevelUp, Dwolla may be getting lots of media attention, but a single app that lets you buy coffee and pastries at a single business’s retail outlets is ruling the roost.

Starbucks App iPhoneThis is actually less surprising than it might sound. The problems with mobile wallet services today are that you don’t know what merchants will support them and actually closing a transaction with a supporting retailer is often more difficult than it sounds. Also, there’s nothing broken about plastic. In most cases, it’s far easier to whip a credit or debit card out of your pocket than present a QR code or NFC-powered smartphone to a baffled store employee.

On the other hand, Starbucks’ mobile wallet integration is as top down as you can get. You’re pretty much assured you can walk into any Starbucks in the U.S., present your phone and walk out with a mocha latte. Starbucks CEO Howard Schultz recently said that the company is processing 3 million mobile transactions each week, though some of them are on Square Wallet.

Berg, however, views Starbucks more as a trailblazer than the pre-ordained king of mobile payments. As they buy more croissants with the Starbucks app, consumers will want to buy other goods, too. Berg projects the mobile wallet market will grow into a $35 billion market in 2017 (still tiny compared to overall credit/debit card use), but it believes that other digital billfolds — such as Google’s, the mobile carriers’ Isis, and the major retailers’ own MCX – will drive the majority of in-store mobile wallet transactions.

In Europe, the mobile wallet is buried even further in laundry pile. Berg calculated that 29 European countries generated only €100 million (U.S. $130 million) in wallet transactions in 2012. Berg, however, expects Europe to embrace mobile payments more readily than Americans, projecting the wallet market to grow to €45 billion in 2017.

Feature image courtesy of Lucid Design Group and Yehohanan92 via flickr

10 Responses to “US mobile wallet users spent $500M in 2012 – nearly all of it at Starbucks”

  1. Adam Berry

    Going off what Brian Roemmele said Passbook has set a new standard for the mobile wallet by following the simplicity of the Starbucks app. One of the major problems facing the expansion of the Mobile wallet and specifically Passbook is the lack of knowledge on the consumer side.

    Apple has done little in advertising Passbook. They are taking a similar approach to Passbook as they did with the App store. Apple left it to 3rd party app developers to promote their own apps which in turn pushed sales in the App store. Apple wants Passes to be promoted by the companies selling them or the 3rd party companies building the Passes for the companies.

    For more information PassKit (3rd party Pass developer) posts up-to-date short articles about what is happening with Passbook.

    or also offers a lot of information on what is happening with Passbook.

  2. Ketharaman Swaminathan

    There’s no doubt that Starbucks’ mobile wallet has been a great success. But, that’s only by the standards of mobile wallets. If we look at the popularity of mobile wallets – as opposed to plastic card, cash, etc. – as a method of payment, a very dim picture images. Even attributing 100% of mobile wallet spend of US$ 500M to the Starbucks App, it only accounts for 4% of Starbucks’ FYE 2012 revenue of US$ 13.3B (Source: In other words, only 1 in 25 Starbucks customers, give or take, opts to pay with its mobile app, the other 24 continuing with plastic or cash or whatever. I never thought mobile wallets were mainstream but it’s only now that I realize that they still have a very long way to go.

    Does anyone know if Starbucks incents its Mobile Wallet in any way? e.g. Add US$ 20 to Mobile Wallet and get US$ 22 worth of coffee.

  3. Kevin, I think that you are absolutely correct. It shows the power of being able to dominate a niche by creating a very focused app as opposed to taking a broad brush approach to a problem like mPayments. I used the stat that 1 in 10 Starbucks transactions were now being performed via their app as inspiration for a blog post last month.

    We are living through interesting times here and will look back in 5 years time when the payments landscape will look very different.

  4. Lydia Lacey

    I agree that the relationship is definitely a strong factor in the success of the Starbucks payment system. It’s quite surprising actually, that not many more brands have adopted a similar sort of system. I work for a company called CloudZync over in the UK, and we’re looking to release the first British mobile wallet application this summer. The app ‘Zync Wallet’, operates in a very similar fashion to that of the Starbucks payment system, however the app covers a broad range of stores and can be used online and over the phone. Zync Wallet, which is a cloud based application provides merchants with the opportunity to set up loyalty programs and distribute offers directly to their consumers.

    Would be interesting to hear what others think on the potential of Zync Wallet?

    • Ketharaman Swaminathan (GTM360 Marketing Solutions)

      Apple Passbook would already have me worried about my prospects if I were Zync Wallet. I’d get even more worried if Nectar, Payback or some other 250 lb chimpanzee in the coalition loyalty program space launched a mobile app. From what I hear, they’ve both studied the market and have decided that it’s not worth entering it since most retailers are unlikely to invest in installing readers that can read loyalty card details off of smartphone screens. While customers might love loyalty card mobile apps so that they’re spared the inconvenience of stuffing so many different plastic loyalty cards in their leather wallets, very few retailers can persuade customers to upload money into their loyalty cards / apps for use at only their business.

  5. Brian Roemmele

    Hi Eugene,

    Really great points! This is exactly why large merchants are taking matters in their own hands. In Starbucks case, one of the reasons they trailblazed the app was to lower transaction costs and to fortify the rewards program. The lower cost came by having a single transaction of perhaps $20 on the customer’s payment card to reload the Starbucks payment system. This drove the development just as much as other aspects.

    You rightly point out the beautiful integration of Passbook and the Starbucks app. This is no accident, they were built by essentially the same team. Headed up by payments genius, Benjamin Vigier, Product Manager of Mobile Commerce at Apple, we can see the future of the Apple iWallet in this implementation.

  6. I definitely believe it is ALL about the relationship, and almost zip about the mechanism. The mechanism seems more like a detriment than a benefit. I would attribute Starbucks’ mobile payment success almost entirely to their loyalty program, along with the efforts to make the mobile payment mechanism as painless as possible. Apple’s Passbook has helped a lot. Before, there were occasional moments where the Starbucks app would require a login. Rather than stand at the counter foolishly trying to remember my password, I would simply pay by credit card. Passbook doesn’t log you out, and is readily available anytime I’m at (or even near) a Starbucks, so I rarely have to dig into the app any more. Making mobile payment acceptable at nearly all Starbucks locations (some airport and supermarket locations don’t have the readers) has definitely lowered the barrier, but only because that effort was tied to a particular brand (Starbucks).

  7. Brian Roemmele


    Great posting! You pointed out the major failure point of plans current mobile wallet companies face. More to the point the lack of empirical research these companies perform and the lack of attention they pay to history and people that have direct experience with merchants.

    Starbucks built their own app using Practical and Pragmatic empirical insights. They built this from the ground up using in house staff, many now working for Apple for the release of the Passbook iWallet.

    Small and medium sized merchants are also the definition of Practical and Pragmatic if they survive past the first 2 years. There is a rather glaring disconnect between the reality and the great ideas of the Tech world. I love tech, but not for tech’s sake. The Practical and Pragmatic merchant (the 90% outside of the Tech centers), however not only is not in love with tech but is quite suspicious of the intent of the latest round of glamor companies.

    The reality is the uptake for the Square wallet for example has been limited to the very Tech savvy. Beyond this group there is little to no interest. Now to those not empirically versed in the needs of the Practical and Pragmatic merchant, it seems to be a “Chicken/Egg” problem that will be cured by the “network effect”. Clearly this is not the case. One can spend millions in TV advertising educating the market (consumers and merchants), but this will do little to impact behaviors (See WebVan).

    The mobile “Wallet problem” will never be solved by forcing consumer adoption (See Steve Case’s Revolution Money Card) nor offering “lower costs” to merchants (See Steve Case’s Revolution Money Card). The issue is there is not a “problem” to be solved, the payment card is not broken, you used it today and it just worked. I certainly understand the “dream” of mobile wallet companies, but the reality is far more complex and can only be “solved” from empirical understanding, and this takes years if not decades, Tech companies simply do not have the time.

    The only caveat is Apple’s passbook iWallet the will be released soon. Built by the same team that built the successful Starbucks app, it will make redundant the mobile wallet attempts of quite a number of companies. Apple’s approach will address a number of issues that where barriers to the Practical and Pragmatic merchant primarily by not requiring any behavior change on the part of the merchant. Nor will it require the merchant to establish a new merchant account.

    In the years that follow, we will look fondly about the debate we all had about mobile wallets.

  8. Nicholas Paredes

    Starbuck’s payment system is very good and I use it occasionally. But, the question this raises is if mobile payments are more about the relationship than the mechanism.

    Do people spend more time to use the Starbuck’s app than say Square? Is the rewards relationship critical to the experience?

    • Kevin Fitchard

      Hi Nicholas,

      According to Berg, the wallet traffic is all going over the Starbuck Card app, not over Square’s app at Starbucks (though Square most account for some of those of 3 million weekly transactions).

      But yeah, I think you’re right. Eventually using a single mobile wallet for a single service at a single business gets old. It’s a good way to prime the market though especially given the mobile wallet’s bumpy road.