Starbucks has successfully implemented a closed-loop mobile payment system using their mobile app. By 2016, 25% of transactions in U.S. Starbucks stores were made through the mobile app. The system allows customers to load funds from various sources like credit cards and PayPal into their Starbucks account. To make a purchase, customers scan a barcode from the Starbucks app at the register. This closed-loop system provides Starbucks with benefits like lower payment processing fees and valuable customer data insights. As mobile payment usage increased, other retailers like Dunkin Donuts and CVS also launched their own closed-loop mobile apps.

1. CLOSED-LOOP
MOBILE PAYMENTS

2. of transactions at company-
owned U.S. stores come
through the app
25%2016
2016
Active Members
12M
Launched the Mobile Payment
using barcode
2009
STARBUCKS APP
orders were placed
through mobile devices
in U.S.
7M
STARBUCKS MOBILE PAYMENT APP SUCCESS

3. TRENDS IN CLOSED-LOOP PAYMENTS
“
”
No single competency is enabling us to elevate the Starbucks
brand more than our global leadership in mobile, digital, and
loyalty. Starbucks is a clear leader in mobile payments and we are
encouraged by how consumers have embraced mobile apps as a
way to pay.
-Howard Schultz, 2013
There are two elements to this
strategy: a closed-loop
electronic check card and a
loyalty rewards program.
The approach uses a
new merchant-branded closed-loop payment card in
which the loyalty or membership card issued by a
merchant is linked to the
customer’s checking account. In effect, the loyalty
card becomes a payment card.

4. - Reload balance from:
- Paypal
- Apple Pay
- Credit Cards
- Visa Checkout
- Gift Cards
- Walks to a store
- Place an order
- Pays using app by holding up the on-screen
barcode to the reader
Source of
Funds
Barcode POSWallet App
MOBILE PAYMENT APP: HOW DOES IT WORK?
Customers Steps

5. Money
Flow
UX
• Source:
• Apple Pay
• Credit Card
• Gift Cards
• Flow
• Form any of the sources, the
funds are loaded in the
Starbucks cloud.
Loading Funds Loading FundsTransaction
• Money is transferred from the
cloud to the merchant once the
transaction is approved
Transaction
• Launch the App
• Select Pay
• Select Reload
• Select “Paying with” (Optional*)
• Under Payment Methods select:
• Credit Card
• PayPal
• Visa Checkout
• PayPal
• Add a new method of payment
• Select Reload
* This step is optional if the default method is
used
• App
• Launch App
• Select Pay
• Align the phone (barcode) under
the barcode reader.
• Completed
• Wallet
• Double Tap Home Button
• Tap on Passes
• Select Starbucks Card
• Hold up the on-screen barcode to
the reader.
MOBILE PAYMENT APP: HOW DOES IT WORK?

6. In a general sense, closed-loop mobile payments are those that enable consumers to load money into a spending
account that is linked to a payment device – for example, a mobile wallet for a specific company.
Maintains ownership
Electronic payments are processed through the merchant system bypassing
card transaction fees.
Lower payments processing fees
Enables capturing big data on customer transactions,
including customer insights buying habits, popular items,
and even an ROI measure on marketing campaigns
Data Analytics
Easy to reward customers for loyal purchases
Improves Loyalty Closed-loop systems offer merchants the ability to maintain
ownership over the the entire merchant /customer process
$
BENEFITS OF CLOSED-LOOP PAYMENT

7. ECONOMY OF STARBUCKS MOBILE PAYMENT
0
15
30
45
60
Credit Card Closed-Loop
$ 6 1 M
Average Food, Coffee Bean and
Merchandize spend per customer
Assumptions:
$ 5 . 5 M
$2.2
Credit Card Transactions (Preload/
Direct transaction)
$0.15
Quarterly Revenue from mobile
purchases (25% of transactions)
$900M
Estimated direct savings by using
Closed-loop system
$56M
Starbucks Mobile payment savings:

8. EXPANDING ON THE SUCCESS
OF STARTBUCKS

9. 2009
STARBUCKS
Launched the first mobile payment
app, and became leaders in mobile
commerce.
2011
ALIPAY
Alipay unleash the new mobile
barcode payments feature
2012
DUNKIN’ DONUTS
Dunkin' Donuts offers mobile
payment app.
TRENDS IN CLOSED-LOOP PAYMENTS
Some examples of Barcode
Payment
https://flomio.com/?p=57560
https://flomio.com/2017/01/trends-on-closed-loop-payment/

10. CURRENTC
A consortium of U.S. retail companies develop
a merchant-owned mobile payment system.
TIM HORTON
Tim Hortons rolls out mobile
barcode payments across Canada
and USA
ZAPPER
Point-of-sale systems automatically adds
a QR code to the bottom of a bill that can
be scanned using an app
2012
2014
2014
TRENDS ON CLOSE LOOP PAYMENTS
Some examples of Barcode
Payment https://flomio.com/2017/01/trends-on-closed-loop-payment/

11. Walmart
Walmart launched “Walmart Pay”
SPEEDPASS+
the app that let users pay for gas and car
washes using smart phone exclusively at
Exxon- and Mobil- branded stations
CVS
CVS Pharmacy launches its own mobile
payments and loyalty solution
2015
2016
2016
TRENDS ON CLOSE LOOP PAYMENTS
The Barcode based mobile payment has accelerated in the last year

12. IT’S ABOUT SIMPLICITY
“ ”
It’s about Simplicity ….With one scan, we’re taking away three
or four extra steps that customers have lived with for a long
time.
-Brian Tilzer, CVS Health’s Chief Digital Officer told Techcrunch.
“It has to be more than just
payments,”
“
”
What we’re trying to do is
provide real utility and solve
real problems for customers
using digital.
“The value is in combining a couple of these things…
and the examples in the market where that has
happened have worked really well.

13. The Barcode based
mobile payment has
accelerated in the
last year
TRENDS IN CLOSE LOOP PAYMENTS
WHY?
RESPONDING
TO
APPLE PAY
STORES
BENEFIT
FROM
LOYALTY
SIMPLICITY
(ONE SCAN
TWO ACTIONS)

14. 01
02
03
01
02
Inexpensive
Fast adoption
Simple ecosystem
Barcodes are simple to
print or to generate and
display on a phone screen.
Barcode readers are also
inexpensive.
All smartphones are
capable of reading or
displaying a barcode.
Familiarity with Barcode is
high: 83% of North American
consumers are aware of QR
codes
Barcode ecosystem is
simple and proven. It does
not require many
stakeholders.
User Experience
SecurityBarcode transactions
present a high level of
friction. It takes more steps
to create a bar code than
tapping with NFC.
Barcode can be easily
replicated by taking a
screenshot or taking a
picture of the screen and
used
ADVANTAGES DISADVANTAGES
MAIN DRIVERS OF THE BARCODE POPULARITY
03
Speed
Barcode transactions are
slow to execute

15. DEATH OF THE BARCODE
PRIORITIZING THE
USER EXPERIENCE

16. 01
02
03
01
02
Expensive
Slow adoption
Complex
ecosystem
MYTH:
NFC tags and readers are
becoming very inexpensive.
MYTH:
ADOPTION
1.9 billion phones
estimated world wide by
2018.
76% of users are very
satisfied using NFC, vs. 53%
using QR
The backend ecosystem can
be shared between
Barcodes and NFC. The
only difference is the
reader. User Experience
SecurityContactless transaction is
much more frictionless than
the barcode counterpart.
NFC has faster time to
checkout.
NFC is a more robust
solution and definitely
more secure
NFC MYTHS ADVANTAGES
BENEFITS OF NFC
03
THROUGHPUT
NFC transactions are at
least twice as fast when
compared to Barcode

17. Funds Source Contactless mPOS
Retail Cloud Service
Apple Wallet
CLOSED-LOOP PAYMENT USING CONTACTLESS
- Customer reload balance from:
- Paypal
- Apple Pay
- Credit Cards
- Visa Checkout
- Gift Cards
- Walks to a store and place and order
- Pay using app by using contactless (Payment
and Loyalty card transaction)
- Funds are transfer from the retail cloud
service to the merchant.

18. Pay at the StoreMasterPass or Visa
Checkout Wallet
Store Receives MoneyConfigure and
select default
credit card
CLOSED-LOOP PAYMENT: ALTERNATE SCENARIO
- Customer selects credit card wallet to use:
- VISA Checkout
- MasterPass
- Walks to a store and place and order
- Pay using app by using contactless (Payment
and Loyalty card transaction)
- Funds are transfer from the default credit card
service to the merchant.
- The transaction is just like a regular credit
card transaction, although is considered
Card-Not-Present

19. CLOSED-LOOP PAYMENT: ALTERNATE SCENARIO
Funds Source Apple Wallet Contactless mPOS
Carrier Billing
Carrier
Cloud
Service
“Carrier Billing”
- The funds are either extracted from Carrier Credit
(Prepaid) or added to the carrier billing.
- Walks to a store and place and order
- Pay using app by using contactless
- Funds are transfer from the carrier user’s
account to the merchant.

20. Tap to
Start Tan
Credit Cards
Or Apple Pay
Store Receives MoneyConfigure and
select default
credit card
Tap to
Complete Tab
CLOSED-LOOP PAYMENT: ALTERNATE SCENARIO
“Bar Tab”
- User Taps for every drink
- Patron credentials are stored on First Tap
- Drinks are added as they occur
- Bill is consolidated on the last tap

21. Higher App usage -> Higher mobile transactions -> Increase per transaction savings
Friction
Enhance the 'buying experience' by making payments simple.
Buying Experience
86 % of consumers avoid stores with long queues.
It takes consumers less time to complete transactions
using NFC than any other technology. (estimated savings:
30 seconds)
Reduce Long Queues
Reduce App abandonment
23 percent of users abandon mobile applications
after only one use
Increase loyalty
Improve App usage Remove as much friction as possible from the payments process to
eliminate consumer frustration. Increase throughput
$
BENEFITS OF NFC-BASED CLOSE LOOP PAYMENTS

22. Backup
Thank
You!

23. 41
Search and Select
Starbucks App
Select Pay
2
Select Pay one
more time
Present it to the
barcode reader
3
4 STEPS TO PAY USING BARCODE (FROM APP)

24. 41
Double tap to
select Apple
wallet
Select Passes
2
Select Starbucks
Pass
Present it to the
barcode reader
3
4 STEPS TO PAY USING BARCODE (FROM WALLET)

25. 4 STEPS TO PAY USING BARCODE
https://www.youtube.com/watch?v=cwsWpdDrwpI
Open, Scan, Done – It’s That Easy
Checkout using Walmart Pay happens in three easy steps:
Open: Visit any register, open the Walmart app and choose Walmart Pay.
Activate the camera.
Scan: At any time during checkout, simply scan the code displayed at
the register. Walmart Pay is now connected.
Done: Associate scans and bags the items… and it’s done. An eReceipt
will be sent to the app and can be viewed at any time.
1 2
3
4

26. 1
2
2 STEPS TO PAY USING NFC
Place near the
reader
Pay and
exchange loyalty
credentials in just
2 steps.
Place your finger
on the home
button

27. 0%
6.5%
13%
19.5%
26%
Q4 FY14 Q1 FY15 Q2 FY15 Q3 FY15 Q4 FY15 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16
Starbucks Card, Loyalty & Mobile Dashboard
Mobile Transactions as % of Total Transactions
(US Company-Operated Retail Stores Only)
Source: Starbucks investor relaCons. Starbucks Coffee Company - Starbucks Card, Loyalty & Mobile Dashboard (Oct ’16)