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Starbucks Under Fire for Manipulating App Payments for $900 Million Profit
04.01.2024 - 09:09 / wccftech.com
Starbucks has found itself under hot water after a consumer protection group has made claims that the coffee chain has been profting from an unfair app payment system. The allegations suggest that a staggering $900 million profit has been made over the course of five years.
The Washington Consumer Protection Coalition has requested the state attorney general to investigate Starbucks's gift card and app payment systems that are in place to steer customers into giving more money than actually needed. The group also talks about how the customers cannot spend the entire amount they have loaded onto their prepaid accounts, which does raise some concerns as to how this practice is being handled.
Chris Carter, the campaign manager for the group, talked about how Starbucks has rigged its payment system in such a way that the consumers cannot spend all the money they have in their accounts. Carter also added, "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.”
What's shocking is that the formal complaint talks about how “Customers loaded roughly $15 billion onto Starbucks Cards last year, and the company relies on these funds as a source of interest-free operating capital. The company has, therefore, a powerful incentive to maximize the funds flowing onto the Payment Platform, and in fact, seeks to maximize this flow by using several manipulative digital design features on its mobile app."
Defending itself, Starbucks has talked to Fortune that the customers are able to pay for their order with whatever amount they have left on their app or gift card, and on top of that, pay the remaining in cash at the store, which will then help bring the balance down to zero. Sam Jefferies, a company spokesperson, even talked about how it is committed to ensuring that the State of Washington believes that the company is in compliance with all state laws and regulations.
The misuse of app payment systems and profiting is nothing new, as we have seen this happening a number of times in the tech industry. What we are more interested in knowing is the severity of it and how Starbucks is going to deal with it. $900 million is not a small amount in profits that span over five years. Let's see what the state decides and whether or not the coffee chain walks away victorious.
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