Partners in Prepaid is a MasterCard initiative created to stimulate collaboration and innovation in the prepaid industry. Join the conversation.


Consumer Mobile Prepaid
Mobile Payments
Near Field Communication

Starbucks Drives Mobile Prepaid Payments in Canada

Starbucks Drives Mobile Prepaid Payments in Canada

December 8, 2011
Robin Arnfield
By: Robin Arnfield
VRL provides independent incisive analysis and insight for the global cards and payments community.

Starbucks Canada says it is the first Canadian quick-service restaurants (QSR) chain to offer a mobile payment service linked to its prepaid card, and it is also the first Canadian QSR chain to link its loyalty scheme to a smartphone app.

An iPhone app converts the customers' card number into a 2D barcode on the phone's screen, which the customer waves in front of a point-of-sale scanner to make a purchase. Each purchase automatically adds loyalty points to the customer's My Starbucks Rewards loyalty account. In October 2010, Starbucks Canada had nearly 1 million rewards program members.

The app allows customers to view their balance on their iPhone as soon as they make a purchase, and they can also view the status of their loyalty account. And the company is keen to point out that if the customer loses their smartphone, they are protected against fraudulent use of their virtual Starbucks Card in the same way that their plastic Starbucks card is protected against fraud.

Chasing pack

While not offering mobile payments for their prepaid cards, two other major Canadian QSR chains, McDonalds and Tim Hortons, provide downloadable iPhone apps showing the location of their nearest restaurants. Tim Hortons' TimmyMe app also displays the nearest locations accepting the prepaid Quickpay Tim Card.

In addition, Tim Hortons and McDonalds Canada have led the Canadian QSR sector's move to acceptance of MasterCard PayPass payments. McDonalds Canada said in July 2011 that it had installed PayPass terminals at 1,400 restaurants across Canada, which accept MasterCard PayPass-enabled credit cards or cell phones. Tim Hortons has offered MasterCard PayPass payments since 2007.

Canada is the second country to offer the Starbucks App for iPhone, following its launch by Starbucks in the US in June 2011. Starbucks said at a Canadian press conference that it plans to offer apps for Android devices and for the Blackberry in Canada in early 2012. It already offers mobile payment and loyalty apps for Android mobile devices and Blackberry smartphones in the US.

Since January 2011, Starbucks has processed 20 million mobile payments from its three apps in the US. "Starbucks' apps have definitely been successful in the US," says Neil St. Germain, senior vice president at US consultancy Speer & Associates. "The types of people who visit Starbucks are youthful, early adopters of the applications that are enabled through smartphones."


Starbucks's Canadian mobile payment service is available at its 800 company-owned stores across Canada. Canadians can also pay with their iPhones at 6,800 Starbucks-owned stores in the US as well as at Starbucks stores located in Target and Safeway US supermarkets.

"The Starbucks app is a smart application in terms of the cycle that Canadian retailers are going through to make sure that the checkout process is as quick as possible," Nizar Assanie, vice president, research at Vancouver, Canada-based consultancy IE Market Research, says. "For retailers, the key issue is to make lines move as fast as possible. Another benefit of the Starbucks app is that it will hopefully encourage customers to make impulse purchases when paying for their coffee."

NFC alternative?

Assanie says the Starbucks app is a precursor to NFC, where a payment or loyalty application on a mobile device communicates via RFID (radio frequency identification) with a contactless-enabled point-of-sale terminal. "Because it uses a barcode, the Starbucks app isn't NFC," Assanie says. "The advantage is that the app uses existing technology at the consumer and retailer end which doesn't need to be adapted. The problem with NFC is its requirement for cell phones to contain a special chip, which so far has limited Canadian rollout of NFC phones."

St. Germain says that, because the Starbucks app gets people used to paying with a cell phone instead of with cash or a credit card, it is paving the way for consumer acceptance of NFC.

Of the three models of mobile payments - NFC, over-the-air, and mobile Internet - NFC will have the biggest impact, Assanie says. "Over-the-air mobile payments involve a network connection to a mobile carrier using SMS," he says.

A Canadian example of an over-the-air service is Zoompass, which is operated by EnStream, a joint venture between Canadian telcos Bell Canada, Rogers Communications and Telus. It offers a mobile wallet which can be used for P2P transfers and for point-of-sale purchases if linked to a Zoompass-branded contactless prepaid MasterCard. In March 2010, Zoompass launched an NFC pilot, allowing users to put a Zoompass Tag 'sticker' onto their cellphone for NFC purchases.

"The advantage of NFC for retailers and card issuers is that carriers don't get involved in the payment transaction," Assanie says.


Due to Canadians' enthusiastic adoption of mobile technology, IE Market Research is predicting a 13.4 percent compound annual growth in Canadian mobile payments users from 1.75 million in 2009 to 2.94 million in 2012. The market will rise from 1.77 million mobile payments users in 2010 to 2.40 million in 2011 in 2012, it says.

Between 2010 and 2012, the number of Canadian mobile prepaid top-up transactions will grow by a 58.4 percent CAGR from 12.79 million to 28.66 million, IE Market Research says. The firm notes that the term ''prepaid top-up'' refers to top-ups of prepaid services such as cell phone airtime, gift cards, mobile money transfer, and P2P payments.

The volume of Canadian mobile merchandise purchases will rise from 2.95 million in 2009 to 4.46 million in 2010, 8.34 million in 2011 and 14.37 million in 2012, IE Market Research says.

Cutting Edge Payments Technology in Canada

Cutting Edge Payments Technology in Canada

In the past few weeks Canada has seen two major initiatives to drive new mobile payments technologies in the country. more
Mobile Loyalty for Mobile Banking

Mobile Loyalty for Mobile Banking

As virtual wallets near the tipping point of widespread consumer acceptance, mobile loyalty is becoming a must-have app. more

© MasterCardGlobal Privacy Policy | Terms and Conditions | Contact Us