Starbucks Is Mixing Coffee And Cryptocurrency

Digital assets are taking over the world. Turn on  financial news or flip through the business section of your newspaper and you'll find something about cryptocurrencies. The ability to turn various industries upside down is definitely something proponents want. 

But even Starbucks (NASDAQ: SBUX), a 50-year-old business  in the physical world, is looking for ways to bring disruptive technology to their businesses. And it can change the way consumers interact with the brands they love. This is how innovative this coffee shop giant really is. This can make you want to buy stocks.

More ways to pay

Starbucks closed last quarter with 24.8 million Rewards Loyalty Program members in  the United States alone, a 28% increase over the prior period. It is widely known that the company has one of the most reliable loyalty programs. Launched in 2009, the program encourages repeat purchases that all businesses want. And  the sheer amount of data Starbucks has gathered on consumer buying behavior over time is a competitive advantage in  itself. 

Coffee drinkers who upload money to the Starbucks mobile app to pay for coffee or beverages earn 2 points (or stars) for every dollar spent, and 1 point when using cash or  credit or debit card do. In addition to being able to pre-order, Starbucks offers free birthday treats and often offers other bonuses to help you earn points faster. This works really well because coffee is one of those rare commodities you can buy every day. 

To add even more payment options, Starbucks is now partnering with digital wallet provider Bakkt to allow customers to pay directly with Bitcoin. And customers can already convert PayPal's cryptocurrency balance to fiat  before restarting the Starbucks app. 

It makes strategic sense  to expand Starbucks' reach by reducing friction and simplifying digital transactions. Loyalty members are regulars and spend more. An astonishing 51% of U.S. retail sales come from Rewards customers.

Loyalty points exchange 

As if  crypto adoption wasn't enough, in the Q4 profit and loss report, management revealed an exciting new program update. “Through blockchain or other innovative technologies, we are exploring ways to tokenize stars and create opportunities for other merchants to link their reward programs to Starbucks Rewards,” said CEO Kevin Johnson. 

He noted an existing partnership  with Air Canada that would allow airline rewards members to link their accounts to the Starbucks rewards program and earn points from both companies for purchases  at coffee shops. “Next year, for the first time, we will see  loyalty points exchanged for other consumer brands,” Johnson added. 

From a consumer standpoint, this is fantastic. The ability to easily and seamlessly transfer accumulated points  from one merchant to another  completely enhances the value of your Starbucks Rewards membership. It also encourages people to buy more coffee with other brands knowing enough that they benefit them. "This approach will lay the foundation for a more ambitious vision of a new, modern payment system that aligns the cost of payments with the value received by buyers and sellers," added CEO.

Investors should be delighted that management thinks so and wants to jump into the payment space. These new developments prove that Starbucks is  a true technology business with a focus on  customer service excellence. Shareholders will keep an eye out for updates on this ambitious goal. 

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