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Starbucks to start taking Square Wallet payments next month

Though baristas won't be able to accept digital tips until next summer.

Starbucks CEO Howard Schultz (left) and Square CEO Jack Dorsey formed a partnership in August.
Roger Cheng/CNET
Next month, all you'll need is your smartphone and Square Wallet app to buy your latte at Starbucks.

The coffeehouse giant today said that customers will be able to use Square's mobile payment system in about 7,000 U.S. stores starting in early November. Customers will also be able to digitally tip their baristas using Square and Starbucks' existing mobile payment app beginning next summer.

The two companies in Augustformed an extensive partnership, as part of which Starbucks invested $25 million in the mobile payments company. Under the deal, Square agreed to process credit and debit card transactions at U.S. Starbucks stores and to enable purchases through Pay with Square.

The area of mobile payments is a hotbed of activity, drawing in everyone from tech giants like Google to credit card providers and wireless carriers. The companies see big opportunities in adding services on top of mobile payments and in developing a stronger relationship with customers through their smartphones.

Pay with Square is a little known but handy service offered to iPhone and Android users. Consumers link a credit card to the account once and open a tab at a store or restaurant. Once there, consumers don't have to pull out a wallet at all; the store can sense the phone's location and automatically transfer payment. The cashier can verify the identity of the buyer through a picture ID and name that pops up on their screen.

With the program rolling out next month, Starbucks cashiers initially will scan a bar code on Square users' phones, according to Reuters. But in the future, the process will use Square's GPS technology to detect a customer's phone in the store. Customers then pay by providing their name to the cashiers.

Starbucks, meanwhile, also offers its own mobile payment app. The company said it has processed more than 70 million mobile payment transactions since launching the app in January 2011. Starbucks has said using Square would reduce its payment processing costs.