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    Digital Payments Are on the Verge of a Major Breakthrough

    Written by

    Yannick LeJacq

    Contributor

     Image: Chris Harrison/Wikimedia

    Like crytocurrencies or virtual economies, mobile payment services seem to hold an immense promise: to fundamentally alter the way we use money. But like any emerging market, they've mostly remained stuck in the purview of early adopters and small business owners, still waiting for the inflection point when a major retailer like Walmart will bring them into the fold.

    It's not exactly Walmart, but digital payments startup Square just won over Whole Foods, the company announced Tuesday. Square checkout stands are already in place in seven Whole Foods locations across the US, and the grocer plans to add more throughout the country in the coming months, a spokesperson told the Wall Street Journal.

    This comes more than a year after Square inked a similar deal with Starbucks. When that deal was first announced, the New York Times called it "the clearest sign yet that mobile payments could become mainstream." Some tech writers, like Recode's Jason Del Ray, are thusly calling the Whole Foods deal Square's "next Starbucks."

    That doesn't seem entirely appropriate, however. Starbucks is the 800 pound gorilla of its market—the largest coffeehouse company in the world, with well over 20,000 locations across the globe. As of May 2013, Whole Foods had just 311 stores located across the US, UK, and Canada. To start, Square's deal with Starbucks covered 7,000 locations—a small fraction of the coffee chain's empire, but still massive compared to Whole Foods.

    That being said, the real promise of the Whole Foods deal isn't that it will put Square's products in front of more people—because, let's face it, a lot of people who shop at Whole Foods probably also frequent Starbucks. What it does do, however, is open up Square to a different kind of commerce. People don't go to Starbucks expecting to spend hundreds of dollars on groceries; they go to make the sort of bite-sized transactions that are incidental enough to make a foreign process like using one's smartphone to process payments seem acceptable. Once Square can put itself behind the counter for customers looking to restock their entire fridge, it's entered a different economic realm.

    But I'm getting ahead of myself here, because Whole Foods made sure to emphasize that it's mostly going to be experimenting with Square's payments for the time being. To start, the company told the Journal that Square's payment systems will serve a support role in the store, allowing customers who only want to buy prepared meals or drinks a way to pay without having to wait in line behind someone with an overflowing shopping cart.

    For now, the main goal is to help alleviate congestion, not establish a new point-of-sale paradigm at the main registers where more money pours in. But judging by Square CEO Jack Dorsey's vision for the company, he doesn't want to stop there. He told Time magazine earlier this year that the company has "always tried to build a tool that scales from an individual—a massage therapist or yoga instructor—all the way up to the largest organizations in the world."

    “We believe, fundamentally, that they should be using the same tools," Dorsey added. "And therefore the only limit is their ambition.”

    It will be interesting to see which comes first: the small business owner using mobile payments who suddenly hits it big, or the entrenched business that chooses to integrate these kinds of digital payments into its entire network. Either way, the competition will be fierce, considering how many tech companies are swooping in—even Amazon, the supposed killer of brick-and-mortar retail, is now rumored to be developing some sort of in-store payments service. So which will be the first to strike gold? Luckily for Square, it's already got coffee and kale.

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