We freely admit that we obsess over Square, the innovative San Francisco-based payments startup.
Now it has joined up with another object of our fascination: Starbucks, whose payments and e-commerce ambitions are poorly understood but just took a major step forward with its agreement to invest $25 million in Square.
We've been puzzling over a few things that this deal just snapped together for us.
Why did Square CEO Jack Dorsey take a trip to Seattle last month?
Duh. He had to have been meeting with Starbucks to seal this deal. Dorsey is very deliberately open with his tweets; for example, he openly tweeted about a trip to Boston and Baltimore this spring when he was courting mutual-fund giants in those cities as investors.)?
Why did Howard Schultz quit the Groupon board in May after only 16 months?
Okay, Groupon has been a total mess lately and Schultz may have just wanted to wash his hands of it. But here's an alternative explanation for Schultz's short tenure on the Groupon board: Could he have been thinking about a Square deal even then?
Groupon CEO Andrew Mason must be secretly relieved that nobody is taking?his big strategy shift?seriously. All the better to quietly rebuild his company as a one-stop shop for local businesses?attracting new customers, scheduling store traffic, and yes, ringing up payments.
Groupon and Square will be competing soon enough. Did Schultz just switch teams?
Why did Square apply for a money-transmitter license in April?
When we wrote about California's innovation-killing Money Transmitter Act last month, we noticed that Square had only applied for a money-transmitter license in April, 15 months after the law first went into effect.
We've since spoken to a source familiar with payments law who has a different take on what's going on. He believes that California's Department of Financial Institutions has an overly strict interpretation of the law and that pure payments processors like Square shouldn't fall under it.
But if Square has broader payments plans?like, for example, getting into stored-value cards?it may need a money-transmitter license. (California's law governs stored-value cards, too.)
Starbucks does a big business in stored value; it's issued 400 million cards worth $10 billion since it introduced the Starbucks Card in 2001.
It's not clear if the Square-Starbucks deal embraces Starbucks Card transactions, too. But if it does, that might explain why Square is covering its regulatory bases.
Source: http://www.businessinsider.com/square-starbucks-deal-mysteries-2012-8
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