Starbucks Accused of Rigging Payments in App For Nearly $900 Million Gain Over 5...
source link: https://it.slashdot.org/story/24/01/04/198251/starbucks-accused-of-rigging-payments-in-app-for-nearly-900-million-gain-over-5-years-by-consumer-watchdog-group
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Starbucks Accused of Rigging Payments in App For Nearly $900 Million Gain Over 5 Years by Consumer Watchdog Groupbinspamdupenotthebestofftopicslownewsdaystalestupid freshfunnyinsightfulinterestingmaybe offtopicflamebaittrollredundantoverrated insightfulinterestinginformativefunnyunderrated descriptive typodupeerror
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"Starbucks rigs its payment platform so consumers are encouraged to leave unspent money on their cards and apps," said Chris Carter, campaign manager for the group, in a statement. "A few dollars here and there left on a payment platform may not sound like a lot but it adds up. Over the last five years Starbucks has claimed nearly $900 million in unspent gift card and app money as corporate revenue, boosting corporate profits and inflating executive bonuses."
[...] The group, in a 15-page complaint, alleges the platforms for Starbucks' mobile app and digital payment cards are akin to an "involuntary subscription." Customers can only reload money in $5 increments, with a $10 minimum purchase. That, the group says, prevents customers from ever reaching a zero balance, meaning Starbucks pockets more of the customer's money. The Coalition does concede that customers can reload their accounts in stores for a custom amount of $5 or more, making it easier to hit a zero balance.
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Since when has it been $10 minimum to use a gift card? I've received Starbucks cards and made purchases around $6. When the card can't cover the whole purchase I pay the remainder with debit, credit or cash after fully using up the card. What am I missing here?-
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But you can transfer whatever amount for free. Buy a $10 card, transfer the.12 over to the new card, new card is $10.12.
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Right. So to place a $5 order and use the $0.12 you have to spend $10. That was the point of the article.
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Yes, you can do this, and most everyone does. But occasionally you don't, and you lose that card with $.50 left on it and you shrug it off.
$.50 * 100,000,000,000 gift cards adds up pretty quickly.
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The cards with leftover funds are all available in the app, and you can transfer the small amounts to combine them into a single card. I usually noticed when I got a gift card as a gift, loaded it to the app, and saw a couple cards with $1 or less. So I transfer the small amounts to the single gift card and delete the old ones.
I don’t see this as a problem. They dont charge me, and I’ve had $.12 on a card for years before transferring it.
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And yet for those years Starbucks owned your 12 cents. Multiply by a few million and consider interest.
Why are you paying for your coffee literally years before you get it?
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This is the same as the opt-in, opt-out website defaults. In this case, should you choose to opt-out, then you gotta jump through the hoops to get your money back. Everyone knows, not everyone will bother for whatever reason, so Starbucks profits. Starbucks is running the game [youtube.com].
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This can make good financial sense if you buy the gift cards from a grocery store that offers fuel discounts. A co-worker of mine did this a lot. If you're doing some home renovations buy $500 in gift cards at a grocery store and you get a fat discount on gasoline. Need a new tv or stove? You're going to buy it anyhow so use gift cards and collect the fuel points in the process. Same goes with Starbucks if you stop there daily.
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To force gift cards to be linked to actual account credit. Plenty of systems already operate this way and it means you never have to care about the gift card itself, scan it in and go pay.
Or better still, legally mandate a system for paying the small transaction out to the customer. A company will quickly implement on account credit system to avoid the hassle of dealing with unused gift card credit.
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Companies love this idea -require customers to create an account in order to use the gift card they received as a gift.
11 states require that gift card remainders be paid out to the customer as cash back if under a minimum amount (which varies by state). In California, you can receive any amount under $10.00 remaining as cash.
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What benefit is there to the customer to constantly top off a gift card instead of paying cash?
Anyway, this is very common behavior, and it's always scummy. Microsoft did it with XBLA points back in the day. Nintendo did it, too. Basically every single scummy gacha game does it. I'd love for this practice to be abolished.
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Loyalty points. Starbucks has some sort of loyalty program where you earn points (which they call "stars" - get it?) which you can redeem for free coffee. But you can only get those points by paying via a gift card you've linked to an account. A lot of places the have some sort of pre-paid balance offer those sort of rewards, to encourage people not to pay in cash.
It's also worth mentioning that you can zero out a Starbucks gift card, I've done it plenty of times. You just have to pay at the register, rathe
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I would be especially unhappy if I received a Charbux gift card as I never patronize them unless I'm at a hotel that only serves it, or I'm somewhere else like an airport that doesn't give you a choice and need caffeine. Why people think overroasted, burnt and bitter coffee is worth drinking is something I'll never understand.
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The majority of their coffee drinks aren't good but if I'm not paying full price for it, their breakfast foods are decent.
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Because their rewards program incentivizes use of reloadable cards. You get two stars (their rewards currency) per $1 spent when purchases are charged to a reloadable card, but only one star for other payment methods. (You don't earn stars for topping off a gift card, though they do sometimes offer star bonuses if you reload a certain amount or reload from a particular source, like Paypal or Venmo.)
I've never run a Starbucks card down to $0 but I assume in person it would act like a split transaction and th
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Exactly this. If you have $0.12 and want to make a $2 purchase in the app, you have to reload during checkout to use the $0.12 and the minimum reload is $10.
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Without reading the article (and barely skimming the summary) I would have to assume this isn't a "cash vs gift card" thing, as most people don't use cash thru the app, or to refill a gift card, they would use a credit/debit card. So if the app is using a credit card for each purchase Starbucks pays the swipe fee plus the % interchange fee from the card network for every purchase. If they make you "top up" with a credit card in $10 increments they essentially avoid one swipe fee.
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Buying your drink before you get there so it's waiting for you.
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by Anonymous Coward on Thursday January 04, 2024 @02:36PM (#64132141)
Support your local independent.
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till they became $3 more expensive for a large Mocha and now SB is cheaper lol. Sorry but after losing my business and sole income to the lock downs now I go where I save $ even if I have to take it in the ass and shop at Walmart which is much cheaper than local grocery stores.
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If you are trying to reduce expensive, I'd suggest you make your own coffee.
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Starbucks are the McDonalds of coffee. They offer a range of products that are palatable to most customers and can generally be relied upon to provide a consistent quality in Starbucks-branded coffeeshops around the world.
In my last office-based job, I was lucky that there was a fantastic independent in the building downstairs. They were card only (no cash payments) so I did feel a bit guilty about supporting them, but they did make really tasty coffee.
Around the world, independent coffee shops can be great
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Starbucks are the McDonalds of coffee. They offer a range of products that are palatable to most customers and can generally be relied upon to provide a consistent quality in Starbucks-branded coffeeshops around the world.
In my last office-based job, I was lucky that there was a fantastic independent in the building downstairs. They were card only (no cash payments) so I did feel a bit guilty about supporting them, but they did make really tasty coffee.
Around the world, independent coffee shops can be great or terrible. Except for Italy - I've never had a bad coffee in Italy.
Starbucks hopes and prays nobody mentions McDonald's and them in the same discussion. McDonald's coffee is one of the few things they get right. And Starbucks tastes like burnt rubber filtered through dirty pantyhose in comparison.
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I was thinking more like burnt ass, filtered through a used jock-strap. But either way your point stands. McD's coffee, especially their "fancy" ones, beat Starbucks hands-down. For "regular" coffee, I prefer BK's to McD's.
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I've found BK's is more variable by region. Sometimes even within the same state. For me, Rapid City/Spearfish BK is superior. Smooth, tastes mostly like actual coffee. In Sioux Falls, bitter, not quite right. McD's is consistent across the state, and nearly anywhere else I've had it.
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McDonald's is the McDonald's of coffee. Except their coffee seems like it might be better than Starbucks, so I don't know.
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by ruddk ( 5153113 ) on Thursday January 04, 2024 @02:42PM (#64132177)
about the Starbucks experience. Their beans are burnt way too hard. the whole purchasing experience(you know making it fun to spend money) sucks.
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I always pay cash at Starbucks in the very rare case I go there, this will reinforce that habit for all other places.
But I know friends and relatives who use cards and apps, so I guess they will get the opportunity to receive a massive 1.91 USD Check after spending at least an hour on a WEB site applying for a piece of the settlement. Great time to be an American.
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I saw an interesting post a few years ago whose thesis was that Starbucks isn't a coffee company; it's a poorly-regulated bank, masquerading as a gift card company, which happens to own some coffee shops on the side. Someone broke down all of the company's public reports to demonstrate that the vast majority of their income derives from investing the money customers pre-load onto gift cards (whether they ever spend it, or not). The amount of cash that Starbucks holds "on deposit" through gift cards rivals the assets of some of the larger banks. I wish I could find the post again.
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To prove your point, this article might clarify the financial aspects [nytimes.com]. In other words, airlines make more money with points functioning as banks than they do as airlines, which is why they all do it.
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Maybe they took down their thesis after it failed to pass peer review.
Starbucks report on their 2022 YE financial statements, stored value card liability and current portion of deferred revenue totaling $1.6 billion. For context, they have total liabilities of $36.7 billion. On the same report, Starbucks reported interest income of $97.0 million. Net revenue from stores was $32.3 billion, with operating income of $4.6 billion.
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[...] The group, in a 15-page complaint, alleges the platforms for Starbucks' mobile app and digital payment cards are akin to an "involuntary subscription." Customers can only reload money in $5 increments, with a $10 minimum purchase.
How about having Starbucks pay interest on any balance that cannot be spent on any of their cheapest products?
For instance, if I have a $2 balance yet their cheapest product costs $2.01, then I should get interest on that $0.01 automatically.
Sounds logical to me!
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They just combine purchase and reload into a single operation to cover that case.
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Many states have laws requiring abandoned funds be turned into the State Comptroller's office with the transaction details. Consumers then have typically 5 years to claim the funds, after which it escheats to the state.
The fines for failing to do so are quite spectacular in some jurisdictions, sometimes up to the greater of 7 times the funds or a quarter of a million dollars per each count, which ever is greater.-
I was going to say this. But in some states the unclaimed property exists forever until it is claimed - the state can not make any moves on it. Starbucks' only hopeful out is that their terms of service that include special wording for forfeiting unused balances is legally binding. But most likely there is a minimum unclaimed amount which doesn't need to be reported.
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I rarely go to Starbucks. I have been given their gift cards as the occasional birthday or thank-you gift and I only go there to use these cards.
It's too much of a bother to me to transfer balances to a single card or use the app, so if I don't use all of the balance on a card that I got as a gift, I don't worry about it.
My thought is that I was given "a cup or two of coffee" and not a set amount of money.
Are they making a few extra dollars from this? Definitely, but I'm not going to worry about it since if I wasn't given a card I wouldn't have gone there anyway.
I suspect that I am far from alone in this thought.
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I've run into quite a few apps that play similar games, pretending you can only reload their online balance in increments of $5 or whatnot.
If you're going to go after Starbucks for this one, I think you may as well think bigger and push for some kind of change to banking regulations prohibiting companies from managing their "gift card" balances this way in apps?
Also, FWIW? I've solved this problem before at Starbucks by going in and asking them to apply my balance on the app in my phone first, followed by paying the remainder with cash or a debit/credit card of my choosing.
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Gift card issuers used to expire the cards and "sweep" the breakage into their pockets.
That's been explicitly illegal for years.
This is an almost twist on the practice. -
All the transit cards I've used with auto-refill payments on can enter the same situation, where there's not enough left on the card to actually take a trip, and you can't tell the card to refill only N number of trips
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