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Table of Contents

Lead Story

Payments' place in the retail playbook - Part 2

Dale S. Laszig


Industry Update

Retailers challenge PCI, seek federal intervention

Data breaches, EMV advance new fraud trends

CFPB to processors: Don't turn blind eye to fraudsters

CFPB seeks public comment on 'payday' loan guidance


U.S. credit card users like installments. A lot

Open-loop prepaid will play a role in next loyalty move by Starbucks

Aaron Mercurio and John Grund

Be vigilant about data vulnerability

MCX pulls plug on CurrentC


The misguided 'kill the check' chorus

Brandes Elitch
CrossCheck Inc.

Guide your startup so it won't implode

Ken Musante
Eureka Payments LLC


Street SmartsSM:
The alternative financing rebrand wrap up

John Tucker
1st Capital Loans LLC

Think PII, not just PCI

Fran Sachs and Ross Federgreen
CSR Professional Services Inc.

Paper reports, online portals can coexist

Steven Feldshuh
Merchants' Choice Payment Solutions East

Consolidation in acquiring

Adam Atlas
Attorney at Law

How integrated, complementary technologies lift valuations

Adam Hark

Company Profile


New Products

Brandable, EMV-certified mobile payments

AprivaPay Plus
Apriva LLC

Biometrics for enhanced, selfie authentication

Eyeprint ID
EyeVerify Inc.


The pursuit of large merchant accounts


Letter from the editors

Readers Speak

Resource Guide


A Bigger Thing

The Green Sheet Online Edition

June 27, 2016  •  Issue 16:06:02

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Open-loop prepaid will play a role in next loyalty move by Starbucks

By Aaron Mercurio and John Grund

Editor's Note: This article was first published in the May 2016 issue of First Annapolis Consulting's Navigator. Copyright © First Annapolis Consulting. Reprinted with permission. Starbucks recently made changes to its highly popular loyalty program, now branded Starbucks Rewards. The primary change centered on converting the Star accrual system (a star is the Starbucks version of reward 'points') from a per-visit model to a per-dollar spend model. Starbucks also announced it would be expanding the reach of the Starbucks Rewards program.

Weeks later, the company announced it would launch a prepaid Visa card in partnership with Chase, targeting a late 2016 launch. While many details of the Starbucks Rewards prepaid card have not been disclosed, we expect it to be a building block of the expanded loyalty program – creating opportunities for Starbucks to manage star-earning transactions outside of Starbucks channels (but with redemption only at Starbucks). Kevin Johnson, COO of Starbucks, commented "this new model is just the beginning of Starbucks opening up its digital ecosystem as well as extending its payment platform."

Figure 1: Starbucks Rewards Prepaid Card: What Do We Know?

Figure 1: Starbucks Rewards Prepaid Card: What Do We Know?

Sources: Starbucks public releases, earnings calls, and First Annapolis Consulting analysis.

Starbucks is one of the most progressive retailers in the world when it comes to payment innovation. Clearly, its focus is on building customer loyalty and expanding the reach of the Starbucks franchise – new channels, partnerships, experiences, etc. However, payments have played a meaningful role in the journey, including a fair amount of experimentation.

Starbucks had a legacy co-brand credit card, DUETTO, launched in 2003 with Chase and suspended in 2010. It had dual mag-stripe technology to enable credit card transactions outside of Starbucks and stored value transactions at Starbucks; creatively, the credit card transactions earned rewards which were then converted to the stored-value account.

The DUETTO product was complex at the time as it was pre-mobile and the program did not leverage the store channel for real-time account acquisition which remains the hallmark of most retail card programs. In another move, as Starbucks plotted its digital future, the company invested $25 million in Square in 2012, but the parties subsequently ended their brief payments relationship.

Today, the stored value card that powers Starbucks Rewards and its mobile payment features is a huge success with 20 percent of company transactions on the card driving an estimated 30+ percent of total spend at stores. Recently, Starbucks announced its decision to accept Apple Pay and will also participate in Chase Pay. Apple Pay, Chase Pay, PayPal, and Visa Checkout are all reload options for the Starbucks app as well.

During JP Morgan Chase's most recent quarterly earnings call, the company noted its broad partnership with Starbucks and touted the recent expansion in scope. Chase will be the merchant processor for all Starbucks non-mobile transactions in stores. In addition, the Chase Pay partnership will include both the Starbucks card reload in the Starbucks app as well as Chase Pay acceptance at the Starbucks POS. The Chase-issued Starbucks Rewards Prepaid Card is further evidence of the deep relationship between Chase and Starbucks. The prepaid card could be the first step in the next phase of the journey and open up broader possibilities considering where Starbucks would like to take Starbucks Rewards.

For more information, please contact Aaron Mercurio, Manager,; or John Grund, Partner, Both specialize in Credit Card Issuing.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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