VeriFone (PAY) Slumps as Starbucks (SBUX) Selects Young Rival for Mobile Payments


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August 8, 2012 9:54 AM EDT Send to a Friend
Starbucks (Nasdaq: SBUX) announced earlier today it has formed a mobile payments partnership with Square for about 7,000 Starbucks locations throughout the U.S.

Under terms of the agreement:
  • Customers will be able to use Pay with Square, Square’s payer application, from participating company operated U.S. Starbucks stores later this fall, and find nearby Starbucks locations within Square Directory;
  • Square will process Starbucks U.S. credit and debit card transactions, which will significantly expand Square’s scale and accelerate the benefits to businesses on the Square platform, especially small businesses, while reducing Starbucks payment processing costs;
  • Using Square Directory, Starbucks customers will be able to discover local Square businesses -- from specialty retailers to crafts businesses -- from within a variety of Starbucks digital platforms, including the Starbucks Digital Network and eventually the Starbucks mobile payment application;
  • Starbucks will invest $25 million in Square as part of the company’s Series D financing round;
  • Starbucks chairman, president and CEO Howard Schultz will join Square’s Board of Directors.
The news is good for Square, a start-up founded by Twitter visionary Jack Dorsey. Twi

Who it's not good for is VeriFone Systems (NYSE: PAY), and the news appears to be hitting shares today. VeriFone is striving to be the mobile payments leader and news that a large company like Starbucks selected a private company to handle the massive amount of transactions it conducts everyday shows confidence that was previously unexpected. VeriFone shares are off over 8 percent in early trading.

Another stock taking a blow today is USA Technologies (Nasdaq: USAT), which provides equipment and solutions for mobile payments. That stock is down about 4 percent.

NXP Semi (Nasdaq: NXPI) is also ticking lower on the session. NXP is a maker of mixed-signal chips, though we're not sure it has signed any exclusive agreements with VeriFone or USA Technologies.

Investors seem to be taking a cautious view on Starbucks today as well, with shares trading slightly in negative territory. Does this mean investors aren't sure Square will be able to step up to the task? Might Verifone or another company have been a better choice?

We'll have to wait and see until fall, when the system is set to launch.

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Comments

Pets.com
Jack on Aug 8, 2012 11:43 AM
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...and maybe VeriFone is like...Kodak...?

VeriFone
Eric on Aug 8, 2012 10:31 AM
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VeriFone is flogging a dead horse. It's been shown that an iPhone or iPad and a cheap dongle works just as well as an expensive VeriFone POS system - do the math...


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