In 2012, Square received $9.47 million in revenue from Starbucks, and that amount increased in 2013 to $114.45 million, until finally reaching $123 million in 2014. However, the transaction costs from the Starbucks deal paint a very different picture: In 2012 Square paid $12.54 million in fees associated with the processing it did from Starbucks, $139.8 million in 2013, and $150.96 million in 2014.
Wow, that’s pretty interesting – when you take credit cards there are fees, no way around that, what looks like what happened was Starbucks got a SWEET deal – they agreed to use Square for the below-market rates for card processing, and Square basically subsided it. Square probably just considered it a marketing expense and was going for market share (“we’ll make it up in volume later!”) or as Square said it was “a valuable catalyst for building best-in-class enterprise infrastructure”. Apple Pay is going to be the winner in this space is our prediction.
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