A breakfast with Square and Starbucks: CEOs Dorsey and Schultz explain their unique partnership

Last night’s announced partnership between Square and Starbucks came as a surprise, but after hearing chief executives Jack Dorsey and Howard Schultz discuss how the arrangement came to be, it seems like one of the most logical unions between tech and business in recent memory.

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The pair spoke with a small group of journalists at a New York City hotel this morning, clearly anticipating that we’d have many pressing questions after last night’s news.

Schultz kicked off the conversation, saying that he hopes to do two things with the Square partnership: enhance the Starbucks customer experience, and also shine a light on Square. As part of the deal, Starbucks will invest $25 million in Square’s next round and Schultz will join Square’s board. At this point, he already sounds like a believer in Square’s potential to change business forever.

Starbucks has already seen massive success with its mobile app, which has processed more than 60 million transactions (more than 1 million a week) since its debut a year ago. That success made Starbucks the target of businesses hoping to jump into mobile payments.

“As a result of the high degree of attachment around mobile payments at Starbucks, over the past six months or so, we’ve literally been contacted by most of the high-profile tech companies who have been chasing ways to monetize mobile payments and payments in general,” Schultz said. Starbucks ended up meeting with all of those potential partners, but the company’s head of digital strategy Adam Brotman eventually directed Schultz to Square.

Schultz said he contacted Jack Dorsey to get a handle on Square:  “Once Jack and I sat down, it was very obvious to me, that the technology, innovation and the lens they were looking at this was highly compatible to the future state of payments in general, and was a natural opportunity for us to create this partnership.”

Dorsey echoed Schultz’s excitement. “This is definitely an epic partnership — certainly for Square — but I think for both companies… it has a definite positive impact on the world,” Dorsey said.

The Square CEO said he has admired by how Starbucks has always been highly focused on customer experience: it’s not just about shilling coffee. He said he appreciated how Starbucks also paid attention to how drinks are served, as well as the experience of entering and leaving a store.

The pair proceeded to have a fairly free-wheeling conversation with the press. Here’s a collection of the best bits:

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• I asked if Starbucks will be paying the same 2.75 percent processing fee as other Square users, but Schultz deflected my question, saying that the company will see savings with Square compared to its current credit card processor. Dorsey noted that Square has worked hard to simplify the many fees associated with processing credit cards.
• Starbucks won’t have to make any infrastructure changes to support Square, since it has already equipped its stores with 2D bar-code scanners for its apps. Dorsey says the Pay With Square apps will be able to generate barcodes to work with those scanners.
• Starbucks plans to roll out Square across the U.S. before the holiday season.
• Dorsey said he was “thrilled” about getting Schultz on his company’s board, as he was already pursuing Schultz separately to be Square’s independent board director. (Getting a celebrity executive like Schultz on the board would be pretty thrilling to any tech startup, we’re guessing.)
• Starbucks will “promote the story of Square” within its stores, Schultz said. He also added that Starbucks wants to keep the Square playing field level, so Starbucks won’t prevent other businesses from using Square (including other coffee shops).
• Both Dorsey and Schultz envision a future where the technology of payments fades away into the background. Schultz wistfully hoped for a day when you can have a more human connection to your barista.
• Schultz says Starbucks has been testing ways to e-mail and phone in orders, but it’s currently too complicated to work. “I don’t see that evolving anytime soon,” he said.
• Starbucks won’t be taking advantage of Pay With Square’s ability to pay for products just using your face, or as you’re walking up to a store. For now, Square will only be used at Starbucks’ registers.
• Dorsey called the deal “pioneering,” and said he was interested in future partnerships with large, medium, and small businesses.
• Starbucks’ $25 million investment in Square will be mostly used for hiring purposes and pushing the company’s international expansion, Dorsey said.
• When asked if the Square partnership will eliminate jobs at the cash register, Schultz simply said “no.” Instead, he believes that he’ll help to create more jobs by promoting Square.
• For now, Square and Starbucks’ loyalty program will remain separate apps.

Photo: Devindra Hardawar/VentureBeat