Starbucks Meet the coffee giant that is literally the largest bank in the world

Not only is Starbucks the largest coffee shop chain in the world, but it also has more assets and cash deposits than banks in the United States and Canada, which makes Starbucks stores coffee-like banks.

When we hear the words coffee or coffee, our minds go straight to Starbucks stores filled with the aroma of coffee beans that stimulate our senses to order our favorite beverage. But what most of us do not know is that Starbucks is not just a company that sells coffee, but rather a giant company that owns much more assets and cash deposits than those owned by major international banks.

As some are surprised to hear that McDonald's is in the real estate business, you may be confused when you discover that Starbucks has become more like a bank with cash deposits that exceeded the $1.5 billion mark. $1.5 billion may not seem like a lot, but you'll be surprised to learn that more than 3,900 banks across the United States and Canada have less than $1 billion in assets.

So what is the story of Starbucks and how it became the largest chain of cafes in the United States and the world? And how it harnessed technology and the loyalty of its customers to become the largest bank in the world? You can find these details and more in this report.

The origin of the story

The story of Starbucks began in 1971 by the trio of Jerry Baldwin, Zev Siegel and Gordon Booker at a historic Pike Place Market store in Seattle, where Starbucks opened its first store selling roasted coffee beans, tea and spices from all over the world. The name is inspired by the classic tale "Moby Dick", which was originally inspired by the seafaring traditions of the early coffee merchants.

Ten years after its founding, young New Yorker Howard Schultz fell in love with the idea of ​​Starbucks and lobbied the founders to appoint him as director of sales and marketing. Then on a visit to Milan, Italy, Howard Schultz decided to make Starbucks a coffee shop instead of a coffee bean store, but the founders were not enthusiastic about the idea, which prompted him in the mid-1980s to buy Starbucks and transform it into the form we know it today.

Within five years, Starbucks had grown to about 140 locations and went public in 1992. Within just two years of going public, the company's number of stores had already tripled. By 1996, Starbucks opened its 1,000th store and debuted in Japan. By the end of 2021, there were nearly 34,000 Starbucks stores in more than 70 countries around the world.

Over the years, Starbucks has grown so much that it has given rise to the so-called "Frapuccino Effect" (the Frappuccino is one of Starbucks' most popular drinks), where real estate prices rise dramatically when a Starbucks coffee shop is nearby, and this phenomenon has been observed in many cities around the world.

More than just a cup of coffee

When the recession hit America during the 2008 economic crisis, Starbucks, like any other company, was in turmoil. But that did not stop it from organizing and strengthening its ranks by recruiting new talent, among them former CEO of (Adobe) Jerry Martin, who took over the Starbucks technology team to launch the Starbucks loyalty card in the form of a smartphone app.

This loyalty card, which is still used worldwide today, has motivated customers to use the Starbucks app in order to make purchase transactions instead of using cash and credit cards. The user can deposit money into his Starbucks account on the app and use the credit to buy coffee This allows consumers to get free drinks when they accumulate a certain number of points.

Through this ingenious method that ensured that customers came back constantly, the Starbucks Rewards app turned into one of the most popular and used in the restaurant and cafe industry. About 41% of Starbucks customers in the United States and Canada buy through the prepaid application, and user balances amounted to about $ 1.5 billion at the end of 2019.

Banks in the form of cafes

Starbucks still has a long way to go to reach the level of PayPal that has $13 billion on its customers' accounts around the world, yet its position is much stronger than that of many banks. And while Starbucks customers in America alone have about $1.2 billion in deposits within its app, 85 percent of banks in the United States have less than $1 billion in assets, according to Market Watch .

So, when customers deposit money into their Starbucks accounts, they are actually lending the company billions of dollars at 0% interest, which is why Starbucks uses that money to invest, take profits for free or even spend on expansions.

Besides zero interest, Starbucks will benefit from something else called a "break" in the finance world, a term that describes the money customers forget or lose within the app, which averages about 10%. In fiscal years 2019, 2018, and 2017, Starbucks' income from the "fraction" was approximately $125 million, $155.9 million, and $104.6 million, respectively.

And unlike traditional banks, the money on the app can only be used by customers to buy coffee and cannot be withdrawn for cash, allowing Starbucks to bypass many of the financial regulations required by other banks that are genuinely concerned about Starbucks' expansion into the financial industry.