Is Starbucks Becoming a Bank?

I recently signed up for “Starbucks Rewards”, downloading their mobile app and receiving a prepaid Starbucks card and it made me wonder - ‘Has this international chain of coffee shops actually become a bank?’

Starbucks requires a minimum of HKD 50 in Hong Kong to be loaded onto your Starbucks card as a deposit when you become a member and incentivises you to continue paying through their app to earn extra “stars” for greater rewards like free drinks.

When I signed up for their rewards program, Starbucks was running a special promotion offer for depositing an initial HKD 300 instead of the minimum HKD 50. Like several other Starbucks aficionados out there, I deposited HKD 300 straight away, knowing that I will be spending a considerable sum at their stores over the coming months and years.

This powerful pull of Starbucks’ brand power coupled with a clever push through incentivisation schemes has seen customers like myself deposit a whopping USD 1.5 billion as of 2019. That is more money sitting in Starbucks customer accounts than several banks around the world have in deposits.

This effectively translates to a USD 1.5 billion interest-free deposit to Starbucks that customers can only redeem by purchasing Starbucks products and cannot withdraw in cash. Starbucks can comfortably leverage this money by investing it into their business and if even a mere 1% of this money ends up getting forgotten, that is a USD 15 million handout. At the same time, Starbucks does not need to follow the strict regulations that banks come under, such as a minimum capital requirement.

So, could Starbucks eventually make a big splash in the FinTech space?

Further Readings

Does Starbucks Want to Be Your Bank?

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