Starbucks is Secretly a Massive Bank
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- Опубликовано: 8 май 2024
- Starbucks is known for their coffee but many don't know about their secretive finance operations. In a clever scheme, the company uses the deposits of customer rewards card as a massive interest free loan to fund business operations. Is this simply a smart business move? or are customers getting ripped off? In this episode we take a look.
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I got a Starbucks gift card in Canada and one day traveled to the US and thought I'd try my luck with my gift card there. It worked! Turns out Starbucks is also a bit of a currency exchange as well.
How much currency did you get? The CAD converted to USD?
Umm it’s all Starbucks money love lol
I was going to make this comment as well.
I was able to accomplish the same when traveling from the USA to Canada.
Interesting find isn't it?
can't that just be because you're buying starbucks funds and not actual money?
You mean...a bank?
What's even more sneaky is the way they somehow managed to make people believe they're drinking actual coffee.
THEY ARE
Coffee snobs are cringe
Hang on ....
That swill is considered COFFEE ?!!?
It is coffee. I work at starbucks as a barista. The cold, refrigerated, glass bottles are probably less so, but we use coffee beans in any made-to-order drinks. We even grind the drip coffee ourselves. The espresso is machine-ground.
Edit: phrasing
@@4thzone697 almost as bad as wine snobs
This is what we call the "Flywheel" of the business. A series of small actions that compound the momentum of the product/service.
This has been the case for quite some time, even in India. I remember when wallets allowed you to load up money to spend. Everyone from Uber to Amazon has provided services of this kind. Paytm capitalized on this quite a bit before UPI came along. AFAIK in India we do have certain rules and laws that are applied on the companies who run these wallet like services. Even from a customer end, certain banking like requirements like KYC are mandatory for all customers. While Indians still prefer banks due to higher interest rates (2 - 6%), these wallet like services have been used quite a bit.
Great service!
Any kind of online wallet in India is considered as a bank by RBI. and they have to operate under those laws. That's why you can't load money in iTunes wallet in India. You have to buy stuff straight with your credit card. As a customer this becomes frustrating because it's a bit harder to purchase stuff in India.
Any kind of online wallet in India is considered as a bank by RBI. and they have to operate under those laws. That's why you can't load money in iTunes wallet in India. You have to buy stuff straight with your credit card. As a customer this becomes frustrating because it's a bit harder to purchase stuff in India.
Similar to Vietnam, but in Vietnam any e-wallet with over ~200$ must be linked to a registered bank account.
@@shantanukulkarni007they are termed as banks but doesn't function as a bank when it comes to customer service or customer interaction. They are just an app with no physical place for customers to go to when things go wrong. It's like they are banks only on paper. That's why a lot of frauds happen on these apps and people get duped very easily but these cases are not very often solved and people specially old get their life's earnings looted.
Another reason to support local coffee shops.
Especially the Dutch ones 👌🏻
Support Dez nutz
Lower taxes and fewer regulations help local coffee shops. Support libertarianism.
@@numblinkartgott'im
100%
should also have mentioned this saves them on credit card non-percentage-based per-transaction fees (which are also higher for online transactions, a key savings for them when they introduced starbucks mobile ordering) - now they only pay these base fees once when you reload your card.
nice, fuck credit cards
Not bad
It's a significant cost, around 2.5% of the transaction. In the UK the retailer can't, by law, charge any less for using cash or card. Imagine someone spending $10 a day, six days a week - take 2.5% of $10 -> 25c now multiply that by 52x6 and you get $78 per customer per year - say 10M customers spend that $60 a week and you've suddenly got $78M and as this video notes, the investment to roll out the system comes from the customers loading up the cards... I don't see anything wrong with it, you don't have to use it. The card seems to automatically expire when £9000 is spent on it and there is a daily £2000 limit. I have a few and they are provided free by companies I work with as a perk, it's very useful when travelling as there's always a Starbucks where there are thirsty people 🙃
@@davidhunt240you are looking at the wrong fee.
For a fee of 2.5% on 10 coffies bought individually or for the amount for those same 10 coffies deposited in one transaction it still exactly 2.5% (unless affected by rounding).
The issue is the per transaction fee. Even if they pay just 0.05 dollar per transaction, the fee is 10 time higher for the 10 individual coffie.
For a business where many clients buy for under 5$ at a time this can be significant.
@@davidhunt240 they still (likely) pay a percentage-based fee when you load your card up... but the fixed per-transaction fee of $0.10-0.20 (generalized) only gets paid once, instead of 5x, 10x, 20x (depending on avg transaction price and reload amount)
So interesting you made this, I recently started using the Starbucks app and got the ick from the needless step of preloading whole dollar amounts to a digital card/currency, instead of just paying my tab in the app from my bank card, directly. Now I know why. And those whole dollar amounts make it almost impossible to completely delete the digital currency from the app. This is as bad as when they tried rounding people's change up/down to get rid of pennies 😂
Can’t you just use your cents or whatever remaining and then pay the rest with credit/debit?
Some companies that do this allow you to scan your rewards card to drain it then pay with another method at the register, starbucks is not one of these companies.
@@GoldenAura32 wow thats crazy
@@owens375you can if you go into the store. I’ve done that to clear my Starbucks cards before
@@GoldenAura32that’s not true. You can ask the cashier to charge you the amount left on your sbux card and then the rest cash or whatever. I used to work there, the cashier who told you no was either lazy or stupid
really love your videos appreciate all the work that goes into finding and explaining these types of topics
I tried the Starbucks loyalty card when it first came out, and was shocked I had to load it up first before I can use it.
Was not happy with that at all, I wanted to earn rewards every time I come in and buy a coffee.
Since I don't normally go to Starbuck I felt like this was a rip off.
I've got loyalty card for Caffe nero and Costa Coffee and I do not need to preload that card, I just scan the QR code, pay and get my stamp.
And thats how it should be done.
Sure but the channel is misrepresenting what Starbucks is doing. It's just a gift card. He is starting conspiracies.
Tell u what.. start your own company and then see which method you’d choose to go with.. the one that’s giving u perpetual free profits or the one where u don’t
@@sabrinakingsley798 you don't have a clue. Star Rewards is not a gift card.
Star rewards is not a gift card, the gift card that you buy to join Star rewards, is.
That upset me too. Luckily they changed it.
Hey congrats on the abc collaboration! You have come a long way since the android mod videos! Your videos are always very interesting to watch , keep up the good work!
00:00 Introduction
00:32 Starbucks Rewards System
01:30 Starbucks' Banking Operations
03:45 Gray Area of the Rewards System
04:43 Other Companies in the Financial Sector
06:03 Government Regulations
06:38 Conclusion
This is an 8min video! If you do not have time to watch it now then later ...TikTok and other short form videos is shortening people attention span: always QUANTITY over QUALITY
What's your point? Tiktok maximum length is 10 minutes
Thank you for spotlighting Starbucks' business practices in this episode! I was aware of their labor violations, but not of their Starbucks rewards investments.
What labor violations, hiring too many tatted liberals?
People should stop consuming their products
it's not a bank. As long as their investment is reported and accounted for in their tax filing, it's not a banking institution. I would say if their reward program which is tied to their GC program is an investment vehicle, then your free drinks and extra stars earned during promotional period would be considered interest payment. Under such circumstances, you will need to get a 1099-INT from Starbucks each year for your tax filing. Remember it is up to the recipient to verify their own # at end of the day. You would need to properly assess how many free drinks and stars you received from Starbucks each year. GL
I think it's totally fine, it's the reward program that provide incentive to customers with great service. One shouldn't be punished for their reward program just because they have millions of customers that want to be in the program. Any business would & should do the same, economically, to allocating funds for the great benefit of all business, not just Starbucks. Those that are questioning simply because they don't have a stake in that particular company. It's mostly jealousy and envy, not for moral justice or virtue. And anyone is crying about it, deep down you know which categories of people you fall under. Yuck! Quit pretending.
They're not the only company doing this...Subway, any one of them with a preloaded card.
Thank you. I pretty much assumed Starbucks and other prepaid cards used unspent balances to earn money. But beware of tying a debit/credit card to a prepaid card. A few years ago McDonalds Canada had an issue when hackers got access to their rewards card and from what I read at the time McDonalds Canada's attitude to customer's complaints was " SUCKS TO BE YOU! take it up with your bank" some customers lost thousands
Good point. Well said. 👍
Don't ever do a debit card. All of the customers that "lost thousands" didn't lose anything if it was a credit card because that could be reported as an unauthorized charge and wouldn't have resulted in any customers losing money.
Tricky.
When you say 'tying a debit card to a prepaid card', what does that mean? Does that mean saving your card info on the app to easily load funds to the (prepaid card) account?
Thank you for this video. How about one on insurance companies?
I had a friend who was an agent. Company policy was to deny every initial claim. Larger claims, no matter how legitimate, would be denied multiple times. They calculate each claim as a loss & invest customer premiums for profit.
At the very least, I now grasp the concept of leverage.
Creating
Most people simply enter the foreign exchange market without comprehending matters like this.
The first stage in building money is determining your goals and risk tolerance, which you may do on your own or with the assistance of a financial counselor who works with a verified Finance agency.
And also you can learn the facts about saving and investing and create a clear plan, you should be able to acquire financial security over time and enjoy the benefits of income management
I'd consider this as vertical integration, just like how Starbucks can have their own warehouses & eventually own coffee bean farms (upstream), they can also vertically integrate downstream to the financial institutions and of course, being subtle about it.
Interesting perspective! I like it
Exactly this. I was suprised he didn't mention this in the video. I was expecting the word "integration" to fall at any moment lol.
They're definitely allowed to do so, but just like they would still need to abide by the "farm laws" (whatever they are) for their coffee bean farms, they should still be treated as a bank.
You are very clever. However, I suggest you Study Sears Roebuck. The poster child of vertical integration. They are no longer in existence ( what is left is a shadow of the colossus it once was). What killed them? Vertical integration. They had no one to squeeze for better terms. They owned everything they sold.
@@siulanainad wow, that's an interesting input!
good on you for getting on the ABC!
Going to find out more about this AI series stat. Super pleased for you!
Very similar to the frequent flyer points business. I saw a video somewhere about how massive and competitive that is. I think there was a bankrupt airline whose point system was still worth a small fortune.
Probably Wendover Productions “How Airlines Quietly Became Banks” for other people looking.
I believe it was American Airlines whose reward points were worth more then the actual company because the par value for 1 mile was 1 cent.
If they’re behaving like banks they should regulated like banks. Plain and simple
Why?
How well do you think regulatory bodies of Banks are doing there * THEIR job? *edit
Fairly mindless remarks.
Except it's not a bank. When you cancel a flight, these funds are often converted into credit. You can't withdraw Starbucks balance as cash in the store, nor can you earn interest. So I guess the question is are those free drink considered taxable if store credits are considered banking? what if you buy Starbucks GC on 10% discount, are those 10% saving considered interest payout as well? I guess every citizen needs a 1099 from starbucks during their tax filing. lol.
thing is they DON'T AT ALL
they don't create money or get it from the FED and give out credits, they just have customer money
Very, Very interesting!! My favorite videos are ones exposing business tactics. I would love to see more videos like this. Great music by the way!
I think Nordstrom has had a VISA card for at least 15 years ago where you could earn points and priority to shop sales if you have a card. They do not have cash deposits as Starbucks has, but the ability to pre-purchase items during the Anniversary Sale before it even starts does certainly encourage spending, putting it on your card, and of course potentially paying interest and fees on the card, which I presume Nordstrom gets a cut off as part of a partnership with a bank. GoDaddy, the domain name registrar, e-commerce and web hosting company have now started offering merchant services to compete with the likes of Square and PayPal. A clever idea, as they can bundle it with their hosting. And of course, airlines long ago have been offering miles with cards, sort of side hustle that is vital to companies whose apparent core business is shaky, based on the repeated hand outs they require from the government. Great video! Congrats on the ABC deal!
Congrats to your content making it to other platforms, its a credit to your editing style and presentation. Thanks for all your efforts always!
I mean the one thing that should be covered is the expected risk is sorta normal. With a checking account. You can withdraw it and risk bank runs if everyone withdraws it. For starbucks there is no expectation of withdraw. The worst risk is that they lose all the money, go bankrupt somehow, and shut down for some reason. But that is unlikely, but in the normal expectations. Banking regulations likely aren't really necessary.
second this. its a clever way to make money
Let them make money. Although in a perfect world, that should reduce the prices.
How else are idiot politicians to win votes? They need these scapegoats to drum up fear. Don't know exactly what moral ambiguities people found in this strategy. It's not like people are forced to keep their money in it and I'm pretty sure nobody's storing their life savings in fucking Starbucks free coffee programs.
Starbucks shutdown in Australia
@@marius165 well, you some percentage off their products
Poker Stars did something like this back in the day, but when they had liquidity issues and a lot of people tried to withdraw (almost like a poker bank run), it all collapsed.
I don't think this will happen to Starbucks though. Unless someone held them to ransom... like... their employees who are NOT happy LOL
Great job doing the collabo with ABC!!!
I am aware they are doing this, Polymatter did a good video on this a while back. I allways try to leverage special deals and promos they have ecpecially when traveling otherwise I only go to Starbucks once or twice a month and just make my favorite drinks at home.
Yeah Polymatter is always doing videos of shit I had no idea was happening. Coldfusion copied his homework.
Sure is where I found out about this lol
I knew I've heard this argument before!
this is why i've never trusted any corporate cards or credit cards no matter how much "incentives" and "perks" or "points" they try to give out. the less cards i have the simpler my life is.
The Apple Card is awesome
But occasional free Domino's pizza?
Corporate cards are for your data. Prepaid cards are for interest free loans, yes. But so what? Would you earn more from the intests than you get in rewards?
‼this ‼
What does it matter to us whether they invest the money?
Thank you for sharing the ABC AI Series.
when I worked engineering, we had a coffee vending machine on our floor... you know the kind, ID-card driven, punch the code of drink, out comes the cup.
it worked by both slot card AND coins, so many of us would have spare coins on us at any time in case the card didn't work for whatever reason.
it didn't take us much to see that *WHEN* the machine wouldn't have coins itself to return change, we'd be losing money if we put in coins ourselves to pay... so, we always put in the card, in addition to whatever coins we had laying around.
when taking out the card, the leftover change would be charged TO the card automatically... no change expended BY the machine whatsoever.
that exactly is what SB is doing here: keeping the change for future purchases.
take out all the fancy terminology, the visuals and the promotions, and that's all there is: they up the prices to uneven values so that there would be an excess to every purchase, and they don't pay it back in change... they charge it back to the account, through credits.
....an account, that you're already paying for, to be a member and use the system.
it's the same thing as buying gift cards with the difference that you buy it for yourself and get additional benefits when paying with it. I don't see why customers should care what happens to their money when they purchase such a gift card as long as they can redeem it anytime they want.
Yes... I mean whether the company takes the revenue and invests it in its own growth or in paying salary etc its a business decision for future revenue. Idk.
When you buy a gift card it can't expire. So the company can't really do much with that money as far as investments as it sits on their balance sheet as a liability (money the company owes) This Starbucks program is turning your money into digital stars which are not the same as a gift card. I can't say for certain, but I imagine these stars could expire and the money to back them is not sitting on a balance sheet as a liability.
During Covid a lot of restaurant chains asked customers to purchase gift cards. I'm assuming it was the same thing. So it's not just Starbucks that doing this.
Reminds me of a Wendover Productions video about how airlines are also doing something similar with their frequent flier rewards systems, to the point that the actual business is losing money and the rewards are the only profitable part.
Though that one didn’t involve investment; I have to rewatch to figure out where the profit came from in that.
Amazing and informative content as always 🌻🌻
if they offered a return and made it clear that the rewards card was being invested, i could see alot of people being completely okay with it.
They would still need to register with the same bodies as a bank would and follow same regulations, which they havent done so
@@craftyrouze yes, they should also register as any other bank.
But it's not being invested. Dogogo said that it was earning 0.05% interest which is far less than inflation or typical interest rates and is just a side effect of leaving billions of dollars somewhere safer than a bank account
@@Septimus_ii one is greater than zero. when it isn't your money that's earning interest, you'll literally take anything. it's a (legal) scam to dupe the stupid.
I have never had, or been inside a Starbucks, nor will I ever.
Congrats on the ABC collaboration! I'm looking forward to watching it
Brilliant research, now I have some business ideas.
Bruv! I had no idea.. thank u for informing me. I think the consumer should at least be informed about the investments Starbucks is doing. The fact that they are taking an interest free loan should not be hidden in the fine prints. The government should have a mandatory label that identifies these types of financial constructions.
Hu??? This isn't a fine print thing at all. When you give them your money, you give them your money. That's it. There are no special kind of financial constructions.
This is happening at a very huge scale with most of large corporations and even people know it is happening.
Well done on the ABC collab! Top notch Aussie broadcasters teaming up!
I had no idea about that….
Good info.
I never liked Starbucks or their food I’ll keep supporting small businesses. Informative video
Economics behind airline miles gets even crazier
Congratulations on the ABC partnership mate. That’s awesome!
A huge supermarket chain in the Netherlands is doing the same. The Albert Heijn (part of the Ahold Delhaize group) uses 'koopzegels' (purchase stamps) which you can buy for 10 cents after every dollar spent. The 10 cents goes to your wallet which is accesable through an app. You even get some interest on it and can withdraw it any time for cash or on the debit card. This video makes me wonder how much money they make on this principle.
I imagine that the terms of service state that after putting money in, it's Starbuck's. In which case, what they do with it after is up to them. We wouldn't question Starbucks investing the profit on the coffee you purchased so if the reward card is treated the same as buying a gift card, it's already their money.
However, if regulation steps in to say that customers *should* be allowed to pull their money out, than Starbucks has truly become a bank and probably should be regulated as one.
Starbucks is just exchanging cash for stars. Unfortunately those stars aren’t as liquid (no pun intended) outside of the Starbucks ecosystem. I think this is OK as long as you, the customer, is aware and accepting of that.
In the US at least most states (probably all) have unclaimed funds statutes. What than means is that is a customer places a deposit for the potential future purchase of product but fails to use it, the company that receives the deposit has an obligation to return the funds to that customer. The company must make a reasonable effort to return the funds and if they fail to do so after a set period of time the unclaimed funds must be sent to the state. The company may not retain these funds. These laws are referred to as escheat statutes. Every company operating these types of programs probably has a team of accountants that deal with these issues either internally or externally.
M-Pesa in Kenya is also an example. Where mobile phone call minutes became de facto universal currency.
Consistently bringing new and innovative topic ideas to RUclips, fantastic stuff ColdFusion 👏
Not new, this topic like every other topic he's chosen have been talked about before🤣
The main thing that concerns me with this sort of scheme is risk. The customer thinks they're putting some coffee money away in a safe place for convenience. In fact the bank is investing it. Sure it's a safe, low rate of return, but sometimes safe investments go down too in a financial downturn. And over time, Starbucks may start to get more risky as the profit potential calls to them. Eventually we may see a day where people want their SB money to buy coffee etc and SB says "it's gone!". If that happens when the company also is facing a downturn of its own, that gets ugly.
but its not like they ever tell you , you can get your points back as cash.... what they really owe you is coffee..... so i dont really see the risk here, the only risk really is that starbucks goes bankrupt and ceases to exist, in which case the points loose all value. I dont see any other risk in this at all, if Starbucks takes my money and gambles it all away.... idc, im just owed a coffee
Yes Definitely without a doubt there should be more transparency. Love ❤️ ur Channel Man. Keep Up the good work 👏
thank you for your eye opening content
Other than the issue of pre-loaded cards psychologically priming people to spend more + hoping you never spend it all, what's the difference between Starbucks taking & investing money from an app vs from a transaction?
Because the transaction is an exchange of money for goods and services where the customer gets their coffee and Starbucks gets a profit from providing that coffee. The app is transfer of money to potentially be used in the future, unless lost or forgotten, during which time Starbucks earns interest off it without providing any value upfront. So I take your $10 dollars and then some time later when I've grown it to $20 you come in and I give you a $10 coffee (which doesn't cost me anywhere near that price) They're double dipping, you're giving them money and they never have to pay it back, at worst they have to give you some overpriced beverages as compensation.
I knew something sketchy was going on when i tried to sign up years ago and they wouldnt allow a payment method other than deposited money. I didnt like the system holding my money so I never signed up.
Nice report Dagogo, and nice track at the end there. It doesn't seem as bad as some of what the financial sector has given us here in the US. I definitely think they should be regulated. What they do with that money should be known at least by regulators.
Very interesting! Thanks for sharing it. ✌️
'Rewards' is what you give your dog for being good.
That’s what all businesses are today. To eventually be a bank. That’s what “leveling up “ is, right?
Greetings from SLOVENIA - the shot of the island on the lake is magnificent. Cheers!
This sounds like what the NSW gov did with the opal cards when first released. It was a min $50 to put on a card and you had no alternative at the time. So for people like me who use the train 3-4 times a year, I had $40+ sitting on it which the gov made interest on
No surprise. McDonald's is secretly a real estate company
Well their logo sure do look more like a bank logo than a coffee shop logo
ah yes, the siren song..
Medium Ice Coffee at Starbucks is $5 / large ice coffee at McDonalds
$2.50 - Literally wake up America !!!
Mcdonalds has a pre-order app now (at least in Australia) rest assured they'll be doing this next.
One of the largest financing companies was General Electric, which has little to do with electricity, although they got beat up a bit in 20008/09.
Just because it is legal, or its not illegal, doesn’t mean it’s right moral just decent or good.
Shadow..
I've had $20 trapped on an unusable gift card with no recourse for more than 4 years now. This is likely systemic--it's impossible to get someone on the phone or in the store to address this. I'll bet it's by design. We should sue the pants off this company.
Virgin mobile is doing the same thing: the stores can sign you up, but to cancel or solve a problem with billing you have to phone Sri Lanka, Bangledish, or the Phillipines and they deal with jerking you around all day. Worse, Virgin does credit reporting, so if you have a bill dispute (I cancelled a druggie use phone number five months ago; I still have to keep paying until I get this resolved, or they'll screw up my credit rating(). ........ all these companies seem to be money plays??
@@user-zp7jp1vk2i Wow that's exactly it! Yeah I mean I don't know if it's a direct conspiracy, but they certainly don't have any incentive to let us keep our money or take it out. Even if they're just using it to collect interest in some money market account, that's yielding them about 5%! What a scam.
I think the most valid challenge to the legality of this business practice would be from small traditional local coffee shop claiming (correctly) that monopoly abuse under the Sherman Act was happening ie unfair competition as a result of a monopoly benefit. Same argument applies to news journalism publishers attacking Apple Microsoft and Google's ability to promote THEIR new publishing services in the search engine, or the OS.
Google Pay is probably the biggest one that would deserve a mention here... and a favorite of scammers, grifters, and shady people in general. It very much deserves regulation.
I would VERY much more trust my money with any coffee shop, than with any big bank I know of!
When a small scale entrepreneur (incredibly) employed me as his salesman and during the interview asked me how I would sell the new specific physical product he wanted to introduce. I intuitively proposed to do it on a subscribtion basis. He laughed out loud, said that he appreciates my sense of humor and hired me. I did sell his product that way. He kept telling me that he likes my sense of humor. At the time I thought that it was a good sign having a boss saying that. When he later fired me, he repeated that he always appreciated my sense of humor. Only then did I understand the drawback of his attitude.
Because... I never joke.
Thing was, that it was a kind of emergency item that COULD become very valuable if something went wrong. Everyday it had no value. The installation cost, so to speak, was a bit hefty. But putting a duration on that payment flow made the monthly cost enough negligable in any budget reprioritation for any customer to deliberate in any internal bureaucratic cost reduction process to actually end the subscription. So NOT A SINGLE SUBSCRIBTION was ever cancelled.
The psychology of removing the safeguard we were providing, and then suddenly (unlikely, never happened to my knowledge, actually) that very item might've turned out to be very very needy, was always overwhelming for whomever in their organization might become the scapegoat for making that decision.
"Operative risk management" I think it is called academically. I like how the Swiss classify risk management:
1 Vertragen = Just take it as it comes!
2 Vermindern = Try to manage it operationally (my stuff described here)
3 Versichern = Enter a deal with the Devil to take over the risk!
4 Vermeiden = Avoid it, don't touch it!
My recommendation is either 1 or 4. Well, 2 is hopefully intuitive to us all in many ways, but don't take it so far as to *outsourcing* that one! It could become a ticking cost. And 3 is the worst because it cannot be anything but a ticking bomb. "When something goes wrong, someone else will take care of it!" Yeah, sure...
As long as their investment losses don't hurt the customer balance, I say it's smart money for Starbucks and the risk needs to be 100% on them.
The risk is on them, unless they went bankrupt, then like any gift card balance you’ve lost it
@philthornton1382 well gift cards are exempt from bankruptcy, they need to ask for court permission for that. If that's the case, I support Starbucks investing our unused gift card money as long as it doesn't interrupt our use of it. I think it's a great idea for them, good for them.
@@StalkedByLosers With Starbucks program it's not a gift card, that's the whole issue. It's like buying in game currency on a mobile game, sure those could be used to buy things in game but the program can be shut down or modified at the will of the company because it's not protected by the same rules surrounding gift cards.
@@StalkedByLosers gift cards are an unsecured creditor and pretty much last in the queue in the majority of the world
@@Skoozi ahh. I need to look into that. Not sure how that is.
Imagine how much money make those companies that offer prepaid cards, how many of us left some cents in our accounts and didn't spend them because there was nothing we could purchase with them? Those cents become a huge sum that can be invested just like starbucks does and make millions.
Thank you for this video
This is why we need to support local coffee shops.
This is something that customers should be more aware of! The customers who do not use or forget to use money on cards should be notified somehow and the whole thing should be more regulated! Unfortunately, it will likely go unnoticed and unregulated until the next disaster where funds will be misused and a big scandal occurs!
Ya I am absolutely not okay with Starbucks investing my money for their benefit and not mine
@@MoneySoul then dont use it lol
@@MoneySoul Next you are gonna find out that when you put coins on McDonalds's charities, the donations are tax deductible for them
Imagine being so far removed from how business works that you don't even know the basics.
Don't want it? don't put your money there
I'm not a fan of corporations, but it sounds to me like common sense & responsibility for you to not lose your sh*t. It's a simple transaction, you pay $ for a loaded card, they've fulfilled their end of the deal. If you lose it, sucks for you -- learn to adult.
@@SirChocula My bank has this program where I load my account with money and then my card can be used to make purchases at just about every store on earth, I can also take my money out of the program because it hasn't been turned into intangible "stars" and if you can believe it, It also has the benefit of being insured and regulated.
Great thumbnail, and my god what a fascinating video. Have you done something on ghost kitchens yet? I think that would be a good topic for you
Great broadcast
I haven't been to a Starbucks since 2016. I don't know how it is in other countries or how it is now even here in Ireland, but back then they did not have organic coffee only the regular one which is drenched in pesticide and herbicide etc, coffee beans are always on the list of dirty dozen, and they didn't use filtered water only regular tap water which is full of chlorine, fluoride and other really dodgy chemicals. So they didn't even have coffee, it was more of a weird concoction of nasty chemicals which you can sip through a plastic lid. 🤢🤮🤮🤮 7 years have gone by and I'm not missing a thing. 🤷♂
Success depends on the actions or steps you take to achieve it. Building wealth involves developing good habits like regularly putting money away in intervals for solid investments. Financial management is a crucial topic that most tend to shy away from, and ends up haunting them in the near future.., I pray that anyone who reads this will be successful in life!!
Theres actually tons of companies that do this in many ways. And it has gotten a lot more important over the past year because interest rates are high
I tried starbucks once. Ended up paying 5 bucks for a cup of toilet water
They should give their customers a cashback program based on the money the customer gives starbucks as a loan.
Is it a loan, though? Consumers gave them money, nowhere does it say when and how they can use it. It's definitely a loophole.
Did you just steal PolyMatter's 2021 video "Why Starbucks is Actually a Bank"?
I wouldn't say this is illegal as these large companies generate profit from all the goodwill they created over time. And indeed, as you say, it's purely voluntarily that customers give Starbucks (and the others with their prepaid cards for spending later) free money.
What I'm curious about though is whether this scheme could snow-ball and somehow require government intervention at larger scale, using citizen's money to cover-up the hypothetical screwups of these corporations.
Other than that I'm fine with the scheme.
Also did you know the app wont let you digitally tip the barista's unless you pay using money you loaded onto the app? So if you pay using a credit card you have saved on file, it wont give you the option to include a tip after the sale.
It's like buying giftcards. Nothing new here.
The coffee they provide is just insanely expensive, while not as good as it was in the good old days
I prefer local coffee shops . Sometimes Costa. Or Pret. I also grind beans and make it at home. I'm in the UK. Thanks for your information!
Thank you for doing these videos! Like GE becoming a lender and insurance company, and McDonald's becoming a landlord not restaurant chain.... Starbucks and SOOO many big companies twist their core business in the name of "profit"
This is MUCH less compelling than McDonalds becoming a landlord. The amount of interest income that Starbucks earns from this scheme is pretty small and probably not even the main reason they run it. I think it's more important that they reduce transaction fees, that they pocket funds which are never spent, and that they lock customers in to spending at Starbucks.
If you're a regular customer, let's say 50 bucks a month, I don't see the harm.
Over a year, they make 30 cents out of the money you put in there, and that's if you don't use it.
Let's be real, there's no way the rewards have a market value of less than 30 cents, so I feel it's a win win situation.
I think it’s fine as long as Starbucks customers don’t lose their money in the trading - I.e. Starbucks doesn’t take a loss in the trades and then suddenly the consumer lost what they loaded on the card
Well I'm sure Starbucks has terms in the fine print that allow them to cancel, change or modify the program at their discretion at any time without warning.
I think the confusion / fear can go away at a place like Starbucks if as a customer you get an option. You can either have this reward system and earn stars, or this reward system and earn a dividend based upon your average balance. Most (nearly all?) would still opt for the stars especially when they see the size of the dividend, but others will opt for the dividend. At that point, it's operating more in line like a bank (with similar regulations), but probably still gets the benefit they have today of "free money", as most will not opt for the stars.
This is a similar situation to rewards points with the airlines so I've been told they don't make really any money on ticket sales their real money is made on the Loyalty program it too is a bit like a bank
It's not what they're doing, but how far they'll go. This current scheme is relatively harmless to customers, but if they feel that they can get away with something passive, don't think that they won't try for something more aggressive.
Future crimes... gotta give the state more power. Think of the children!
even if they did invest in something super aggressive and it failed, they would have to literally be insolvent for customers to lose out. as long as they can cover their expenses then it's fine for the customer
@@spicy_xinger Think bigger. I assure you, they will, if you let them.
@@josephmassaro I hope you are underage, because that take is dumb af
When you buy coffee, they can do with the money whatever they want. When you buy credits that can be exchanged for coffee, it's already their money, not yours
@@user-xl5kd6il6c You are in error. Starbucks is using the money from the credits to invest and make a profit. Banks do this with depositors' money, but they disclose it and are covered by the FDIC. Starbucks neither discloses this nor are they covered by any Federal insurance scheme. If they were to encounter a liquidity problem, they may not be able to honor or refund the credits purchased. While this is unlikely, the point is that they are not disclosing what they are doing and there is no reason to believe they would not pursue a money making scheme that might financially harm their customers. Lack of transparency is the genesis of most financial disasters.
I really don't see the issue with this. Customer's get free stuff and Starbucks makes more profit. Basically the definition of a win-win.
Exactly. Pretty smart and obvious way to make more profit for Starbucks
The issue is the lack of transparency for the customer. When you go to upload money onto your card/account, it doesn’t conspicuously state they’re going to take that money and use it to invest to make profit off of it.
@@YaYousef5 Banks do the same thing. But we don't seem to care about that do we? Consumers need to be wise where they park their money.
@@raghu7174 one of them is a bank. The other is a franchise where you can get 4 days off sugar and caffeine in a single drink. That’s the difference. There needs to be transparency.
@@YaYousef5 Why does there need to be transparency? If there was risk of customers losing their money then I'd agree, but if the investments are risk free or otherwise 100% covered by Starbucks, then it doesn't affect customers at all.
I worked out of town, the only nice store which was open early and was nearby was a Starbucks. So I drank 3 lattes, ate a panini most days. I wasn't alone, I kept seeing the same customers.
That was before I worked out it was $17 X 365 days = $6,205 a year. My mortgage is less than that, so I bought a filter machine for work instead. Starbucks - it's a bank alright.
I'm not sure if it's still the current model. But a decade ago, HERTZ car rentals used to charge customers for insurance and the "excess" fee for damages. But they never actually had any insurance on the vehicles. It was an in-house damage vs returns decision.
IE. 1 in every 200 cars gets written off it's built into their model and cheaper than paying insurance on fleets. Etc...
So you could call it fraud in one sense by selling something that never existed
Dagogo, thank you for always uncovering all the interesting ways that corporations are making a little extra money.
We are all a part of these situations. This is the way things are going and investors of these giant corporations want more and more returns on their investment.
Wouldn't we all?
7:07 "do laws need to be changed?" no matter how many times laws get changed, there will always be loopholes
Changes proposed, the owners of the president and his party aka political donors lobby for changes, law ends up worthless.
Might as well not try then?
Sounds pretty defeatist.