What is synonymous with the word “coffee”? For many, the first thing that comes to mind is “Starbucks”. The fast-food chain has become an empire in its league and has accumulated a culture that is hard to replace. They are famous for many things such as Pumpkin Spice Lattes, their recognisable cups, and their unique language. Many people recognise Starbucks for its name and the products they offer, but few would think of Starbucks as a bank.
Let us explain
Starbucks consumers have lent out $1.6 billion in 2021. To put that into perspective Starbucks holds more consumer cash than most banks around the world. For example, Customers Bank and Green Dot Bank have less than $1 billion of consumer money.
The major fast-food chain has been in the business for several decades. For a business that is creating a culture, has a relatively young customer base, and growing competition, innovation is crucial.
Starbucks started to focus more on technology and created their own Starbucks Card.
Initially, it was your basic rewards card that every major retailer gives to you for discounts in return for your loyalty. However, with the digital sphere growing and becoming more advanced, the way people pay for things started to shift.
The way the Starbucks Card program works in 2021 is by adding money to your Starbucks account instead of paying in cash or other cards, like a credit card. This allows you to pay with the Starbucks app giving you twice as many reward points that you can redeem for free drinks.
While it may not sound like something innovative for the fast-food industry, it has been a success. Today, the Starbucks app is the most popular rewards app amongst all competition.
Starbucks has a loyal customer base as there aren’t many competitors that can compete with the culture around Starbucks. With most customers being repeat customers, they are not afraid of putting large amounts of money into their Starbucks accounts because they believe that they will eventually use it.
Something that many are not aware of is that customers are essentially providing Starbucks with a $1.6 billion loan with 0% interest. Starbucks can use this money however they please. For example, invest it in the market, or invest in new stores.
It might sound illegal, but legally speaking Starbucks is not a bank and is not subjected to the same regulations and rules. Banks are legally supposed to have a cash reserve, nevertheless, Starbucks is not required to do so because the money cannot be withdrawn for cash, only coffee, allowing it to bypass financial regulation and use deposited money however it likes.
What’s even better, for Starbucks in this case, is that some of the deposited money will be lost or forgotten just like many of us forget to cancel our gym or Netflix memberships.
How can you do the same or even better? (Using Banking-as-a-Service)
If you wish to have a similar solution to Starbucks, then PayPugs has the right solution for you. Banking-as-a-Service (BaaS) allows your business to integrate a payment system into your interface. The BaaS solution allows your company to distribute e-wallets to every end-user. With these e-wallets, the end-user will be able to directly pay money to you within your system, reducing the need for an intermediary. Moreover, your company is also able to distribute debit or prepaid cards to your end-users which they can use for your services.
To put it simply, it’s a customizable, ready-made platform to give your business an advantage over your competition by offering an intuitive payment and card system.
If you wish to learn more about it, feel free to contact us.