In this article, I explained how Starbucks, under the guise of a coffeehouse franchise, operates as one of the world’s largest unregulated banks.

With 35,711 stores worldwide, Starbucks has created a cleverly designed rewards program that allows it to hold an astonishing $1.7 billion in customer deposits (in the form of funds pre-loaded onto its mobile app).

I also detailed how Starbucks benefits from these customer deposits in three key ways:

Breakage: When customers don’t use their pre-loaded funds for a while, Starbucks counts the unused amounts as revenue. For instance, in 2022, Starbucks recorded $196 million from unused deposits as revenue.

Free capital for expansion: Starbucks uses these deposits as interest-free funding to grow its business.

Short-term investments: By making short-term investments with these funds, Starbucks generates up to $85 million annually in extra revenue.

Interestingly, Starbucks enjoys all these benefits without paying interest to its customers, as it technically isn’t a bank. You can read the full article here: