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Starbucks' recent decision to endorse the Square mobile payment platform is a huge shot in the arm for the fledging mobile payments solutions provider, which has until now seen rapid adoption with smaller merchants.

Why is this deal a huge win for Square? Starbucks has been a pioneer in the deployment of mobile payment solutions. According to industry estimates, the company is processing more than one million mobile transactions per week in the U.S. alone. Now, beginning this fall, Square will process all of Starbucks' debit and credit card transactions.

This provides Square with the much needed scale and springboard to pursue bigger relationships with mainstream retailers and improve their competitive positioning with PayPal. Local Square businesses will get visibility on various Starbucks digital platforms and the potential for increased foot traffic.

This partnership signals the green shoots of a maturing mobile payments industry. Driven by a tech-savvy customer base, Starbucks has been a pioneer and early adopter in the deployment of mobile payment solutions.

Starbucks could have continued with innovation on the mobile payments front. But they have demonstrated vision and leadership here. This is a smart move for Starbucks as they have realized that, to drive mainstream adoption of mobile payment solutions, they need to be aligned with a mobile payments ecosystem and reduce complexity for their customers. No single vendor can do it all alone.

Having Starbucks chairman Howard Schultz on its board will provide Square with valuable market insight, mentoring and access to top-tier retailers for increased market adoption. It will also help them to scale their platform and get battle ready for handling larger transaction volumes. Get ready for trench warfare with the likes of Paypal and Google Wallet.

Sixteen major national retailers have already endorsed the PayPal platform. Their most recent tie-up with Discover will enable more than 50 million US customers to enable PayPal as a payment option. Square's partnership with Starbucks will help them improve their competitive positioning and branding as they fight for market share gains in the retail segment.

The smartphone wars have become a war of ecosystems with the Apple IOS and Google Android in a market leadership position. We may now be witnessing the next iteration of the smartphone wars in the mobile payments industry.

It will be interesting to see how the battle of the ecosystems plays out in the coming year.

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Harish Bhat
Harish is president and COO at ESQ, a leading provider of business transaction management solutions. His extensive background in IT includes work with NCR and Tandem and skills in business development, product and strategic alliance management and more.
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