Is a coffee house a bank?
Photo by Demi DeHerrera on Unsplash

Is a coffee house a bank?

I enjoy viewpoints from financial services commentators when they share insight, trigger questions or ignite sparks of light in and beyond the space they are talking about.

Marcel van Oost is one, among many, I follow.

A thought he recently posed:

Is Starbucks secretly a bank?

This question has been around since 2008 when Starbucks CEO Howard Schultz, to misquote Star Trek, began to boldly go somewhere with the business and its Starbucks Card Mobile app.

2008 was a formative time. 

It marked a shift for me as I moved beyond a career in media and an arc from crime correspondent to travel writer, tabloid, national / foreign affairs and business journalism to one anchored in corporate communications and brand messaging.

2008, a year when:

  • Apple App, Android and Google Play stores launched
  • Jack and Jim founded Square
  • The pseudonymous Satoshi Nakamoto released the Bitcoin whitepaper

The relevance of a name or word and how it perhaps does not affect what it really is goes back further ...

  • Banking is necessary, banks are not.’ – Bill Gates / 1994
  • Words of nuance, words of skill and words of romance are a thrill. Words are stupid, words are fun. Words can put you on the run. Mots pressés, mots sensés. Mots qui disent la verité. Mots maudits, mots mentis. Mots qui manquent le fruit d'esprit.’ -  Tom Tom Club & Wordy Rappinghood / 1981
  • A rose by any other name would smell as sweet.’ – William Shakespeare, Romeo and Juliet / close to 1600

Twin Peaks premiered nearly 20 years before 2008 and the TV series created by Mark Frost and David Lynch is remembered for many lines - among them: 'Damn fine coffee.'

It was not linear TV. That model had been recast by Hill Street Blues. Still, it was mapping a future. Businesses and brands that can do things differently and better make a difference.

Starbucks is not a bank. Not today.

Ok, so Starbucks accepts ‘pre-loaded’ deposits ... as do congestion charge, privately-owned motorways, bridge operators and many other brands.

It is estimated that the US alone accounts for nearly two thirds of the global $3 trillion+ market for prepaid cards, and this market is forecast to enjoy well-beyond, inflation-busting growth between now and 2030.

Load up your money today, get something in return tomorrow or maybe later.

Earn 0% in the interim.

Hot, Cold, Red Eye, Black, Blonde, Dark, Skinny or to go? Whatever you load up as a coffee hedge, it is free capital for Starbucks.

Money it can use without banking regulatory rails or oversight.

That is the offer. No froth.

Sure, there are an estimated 31-34m ‘active’ users on the Starbucks rewards programme and considerable interest in the $1.6n+ customer deposits.

It sounds punchy. Real good too and perhaps industry vertical dominance threatening when set against a data point that just over eight-out-of-10 US banks have less than that much money as their total deposits.

Prepay - ‘enjoy the caffeine lift or hit’.

The model works well too beyond the coffee and snacks to-go industry, as noted earlier. 

Starbucks does not, as yet though help you lend, borrow or manage your financial assets.

On the spectrum of helping you facilitate payments, it is focused on a global yet somewhat niche ecosystem anchored to coffee purchases and credit ‘within’ a Starbucks star system.

Yes, it is a coffee house, but from a bank lens of regulatory oversight and offering ‘core’ banking services, Starbucks is not the ‘House of the Rising Sun’, to misplay The Animals from the mid-60s. 

What is notable is that banks are trying to be relevant.

They previously had no desire or incentive to innovate. They held their line for way too long. They only materially changed when others were able to see and effectively challenge or own, directly or indirectly, parts of the customer, payment, settlement flow and revenue channel.

What is also notable in recent years is that non-bank brands not only know that helping you pay and buy can help them and you. Today, they have ways to do it.

Now, who knows where new CEO Brian Niccol may take the Starbucks brand.

Elon Musk has often said he wants X to become an ‘everything app’ like Wechat in China, to be perhaps your new bank.

Many brands have to date framed their stories around being this so-called ‘super app’. A front-of-screen one-shop, go-to name.

Many of those narratives were framed at a time when globalisation and scale were seen as a be-all for every multi-geo corporate strategy. Being locally relevant and there for customer support or simply the customer were not seen as key value propositions.

The irony is, it matters. It always did. Always will.

Let’s see if with the new Life of Brian, he says or signals anything about Starbucks repositioning to get more dollars beyond grab-n-go-coffee as … a bank.

Andrew Yakibchuk

React.js/Node.js teams | COO at Crunch.is

2mo

Gavin, storytelling meets banking insight. How about the coffee?

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Jeremy Roberts

President & CEO at CBS Academy

3mo

Good read Gavin - and I think in line with how the younger emerging banking/non-banking consumers think of money as just digits "somewhere" rather than hard cash in their traditional bank account. As seen by the money "held" on peer to peer payment apps like Venmo in the US where the app provider "wants" the money to really stay in their own bank account, so they have access to that capital rather than auto transfer to the recipient's linked bank account.

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