Balance held on Starbucks Cards higher than deposits at some banks
According to data services provider S&P Market Intelligence, the value of the outstanding balances on Starbucks Cards, the prepaid cards issued by the US coffee shop chain, is higher than the value of the deposits held by many banks.
The Q1 report says that the value of funds held on the Starbucks Card and its cell phone application total $1.2 billion. This is around double the amount accumulated by consumers at financial institutions such as Customers Bank or at the biggest US prepaid card provider, Green Dot Corporation.
Explosion of popularity of prepaid card and cell phone application
Starbucks Corporation is now a giant chain with 24,000 coffee shops in 68 different countries. It launched the Starbucks Card, with benefits such as free wifi and free coffee or tea refills, in 2008 as part of a marketing strategy aimed to gaining an edge over its rivals (benefits vary depending on country and region).
Cashless ordering was made possible by the full-fledged launch of a cell phone application in 2011 and, given the convenience offered, the application was immediately recognised as the prepayment method that makes the most sense.
The Starbucks Card is popular with customers not only for them to use themselves but also to give as a gift that cannot fail to please, and millions of cards were apparently sold last Christmas.
Consumers’ “coffee savings” held on this popular product finally begun to outstrip savings at financial institutions.
Although no match for the deposits at giants such as PayPal ($13 billion) and SVB Financial ($4.55 billion), Starbuck “deposits” have already overtaken those at banks such as California Republic Bank ($1 billion) and Customers Bank ($780 million).
Looking also at companies that provide prepaid services, even the deposits at Green Dot Corporation that cooperates with major card companies Visa and Mastercard are only $560 million.
Starbucks is still actively expanding its global network of stores, and notable progress is reported with a Five-year Store Expansion Plan in China, whereby 500 stores will be added each year.
If the number of customers continues to steadily increase like this, surely the day will come when “coffee deposits” are higher than deposits at major banks.