Industry Deep Dives: Payments (Square, Starbucks, and Venmo)

Eugene Leychenko
5 min readMar 26, 2016

The payments space is one of the most competitive industries to be in. Credit cards earn a fee equal to a percentage of the transaction value each time a customer swipes his or her card. In Q3 2014, card issuers saw almost $470 billion in total payments made by customers using their credit cards.

Gen 1: Cooler Cards

Coin card

There have been a handful of companies that tried to disrupt credit cards with cooler credit cards:

  • Simple — is a web and mobile application that unifies various accounts into one accessible bank card.
  • Coin — enables users to store all their credit, debit, gift, loyalty, and membership cards in one place via a proprietary connected device.
  • Plastc — the card that stores your credit, debit, gift, loyalty, and even access cards on a single device.

However, none took off because they were not solving the real pain point of credit cards. People do not want to carry a wallet, period. Customers always have their phones on them and their payment devices need to live in the phones.

Gen 2: Hardware

There are two options, hardware and software. With hardware, the phone itself has to be the medium and would work through an NFC chip in the phone. The issue is that the merchant has to have an NFC receiver. This is how Apple Pay currently works.

Gen 3: Software


The other option is software. There are also a handful of companies that are having people enter in their credit card numbers to have their phone linked up and act as their payment gateway. LevelUp is a loyalty program app that allows you to onboard your credit card and pay through a QR on your screen which is scanned by the merchant.

Square, a company which allowed anyone with a smartphone to process credit cards, came out with a feature called Card Case. Card Case is a mobile app that you can fill with ‘cards’ of all the merchants they visit and buy from who accept Square. These mobile cards include locations, merchant contact info, coupons, photos, menus, comments and reviews from other customers, order and purchase history and more. The app also allowed you to create a tab at a restaurant under your name without having to pull out cash or a credit card, as the app has your credit card info saved.


Venmo, founded in 2009, branded itself as an app that lets you make and share payments with friends for rent, utilities, dinner, drinks, movies, concert tickets, birthdays, and anything else. They don’t currently make money on friend-to-friend payments, however Venmo is working with a number of businesses (cafes, taco trucks, etc.) who accept Venmo as payment. They would charge these businesses a small percentage of the payment. Venmo is betting on having enough people on the system making peer to peer payments that when businesses sign on, they will have enough of an audience that a payment medium such as credit cards would not be necessary.

Lastly, the Starbucks Wallet app, in the most unique entrant in the mobile payment space. Starbucks with a market cap of $90B+ and 22k stores in over 64 countries is positioned to take over the mobile payment space. In 2014, Starbucks announced that 16 percent of US transactions took place via a mobile device — about 7 million mobile payments per week. With that kind of rapid adoption, Starbucks can easily onboard other merchants and become a platform of payments for all. It’s CEO, Howard Schultz, said in 2014 that, “Most retailers don’t have the competencies, resources and flexibility to make the investments. We are getting calls from retailers of all kinds. We have an amazing, stunning opportunity within mobile payment and social digital media. We are going to reinvent and create opportunity for new sources of revenue and ultimately profit that’s complementary to our business.”

Credit card purchase data is also a huge business. According a white paper put out by the credit card processor TSYS, “card issuers are particularly well-poised to derive benefits from big data. Given the amount of customer transaction information they collect, they have a huge opportunity to use that data to better serve and retain their current cardholders and acquire new ones. Transaction data — derived from customer activities like purchases, cash withdrawals, balance transfers or ATM withdrawals — will provide a more complete picture of cardholder behaviour and, in turn, identify which cardholders are the most profitable.” Based on the data they collect they can deliver relevant messages and offers to cardholder segments.

However you don’t need to be a credit card company to get this kind of insight on your customers, you just need to be a company that requires you to enter your credit card and to be given permission on monitoring your account. Here a few companies that are uniquely positioned to scrape that information with their value added services.

Paribus is a company that scans your email for recent purchases and if a price has changed in your favor, it will file the paperwork to get you back the difference.

Apps like Mint (acquired by Intuit) and Level (acquired by Capital One) require users to enable access to their bank accounts and credit cards to be able to monitor the usage to make sure that the users are being disciplined. Based on the data they collect, they can surface offers to places that they frequent or new credit cards that match their spending habits — and be able to make money referral commission on both of those.

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Eugene Leychenko

Writing about business strategy and well executed development. Running (web & mobile development from NYC/LA)