Is Starbucks a Bank?

Plus: manifestation rules, morning routines, and dealing with disappointment.

Author

Jordan Belfort
April 23, 2025

👋 Got $1.6 billion sitting in your wallet? Starbucks does, and it's not from selling coffee. The coffee giant has quietly built one of America's largest "banks" through its gift cards and app balances, collecting interest-free loans from millions of customers who just wanted their morning brew a little faster.

In this edition:

  • Jordan’s top bookmarks

  • Starbucks banking operation

  • Creating loyalty programs

Read time: 4 minutes | 897 words

TOGETHER WITH BILL.COM

See BILL in action, score AirPods 4

BILL is the #1-rated financial platform for controllers, streamlining bills, expenses, budgets, and business credit. New features include:

  • Assistant permissions

  • Auto-freezing cards

  • Visa perks

  • Smart API integrations.

See it in action—and claim your AirPods 4.*

*Terms and conditions apply. See offer page for details. The BILL Divvy Card is issued by Cross River Bank, Member FDIC, and is not a deposit product.

STORY 

☕ How Starbucks Quietly Built a $1.6B Bank 🏦

Let's talk about the brilliant financial strategy that makes Starbucks not just a coffee powerhouse but an unofficial banking operation in today's retail marketplace.

Back when gift cards were merely simple plastic rectangles exchanged during holidays, few could imagine they'd become the backbone of a multi-billion dollar interest-free lending program (see how this works).

After years of strategic innovation and customer loyalty building, Starbucks has created a financial phenomenon that transforms your coffee habit into their capital advantage.

  • At any point in time, Starbucks holds a staggering $1.6 billion in customer funds

  • The company earned approximately $150-180 million in "breakage" revenue last year alone

  • Gift card balances represent about 6% of Starbucks' total liabilities

  • These stored values operate as interest-free loans to the coffee giant

Behind the convenient tap-to-pay experience is a sophisticated financial approach that transforms each gift card reload into capital Starbucks can freely invest without banking regulations.

When you load money onto a Starbucks card, you're essentially making an interest-free loan to the company. They can use these funds for expanding stores, buying inventory, or any other business purpose without paying you a dime for the privilege.

Their approach isn't just about selling coffee — it's about perfect financial engineering. As mobile payments became more sophisticated and customer loyalty more valuable, the industry created a way to access billions in customer funds while avoiding traditional banking rules.

What separates Starbucks' gift card program from traditional banking:

  • They operate without paying interest on what is effectively a $1.6 billion deposit base

  • They created a "minimum reload" system that often leaves small unusable balances

  • They benefit from "breakage" — money loaded onto cards that never gets spent

  • They can cash in on funds from forgotten gift cards as pure profit

But consumers aren't completely powerless. Residents in California can withdraw up to $9.99 from their Starbucks cards, while Oregonians can claim up to $4.99 through the company's cash redemption program. Several other states have similar laws requiring companies to redeem small gift card balances for cash, though the process often involves calling customer service rather than a simple in-store transaction.

Go Deeper: In what might be one of the most brilliant financial strategies in retail, Starbucks has transformed its loyal customers into its biggest lenders, with Korea's 3rd largest financial group reportedly calling them "an unregulated bank, not a mere coffee company."

TOGETHER WITH HUBSPOT

Ready to save precious time and let AI do the heavy lifting?

Save time and simplify your unique workflow with HubSpot’s highly anticipated AI Playbook—your guide to smarter processes and effortless productivity.

INSIGHT

🏦 The Stealth Banking Revolution

The Starbucks model reveals a profound shift in how companies can create financial leverage beyond their core business:

  • Interest-free capital is the new gold standard. While banks pay interest for deposits, companies like Starbucks receive billions in customer funds without paying a penny in interest. This zero-cost capital provides immense competitive advantage for expansion, innovation, and market dominance.

  • "Breakage" creates pure-profit revenue streams. When customers don't redeem gift cards fully, companies capture 100% margin revenue. This isn't just found money—it's a predictable, scalable business model that companies can forecast and build strategy around.

  • Financial regulation arbitrage creates opportunity. By operating outside traditional banking regulations, these companies avoid costly compliance requirements while maintaining many banking-like functions. This regulatory gray area has created a massive competitive advantage.

  • Customer lock-in through financial friction. Once funds are in a closed system, the psychological barrier to exit becomes substantial. Companies can create subtle "balance traps" that ensure customers keep adding more than they need, perpetuating the cycle.

This revolution isn't just changing retail—it's transforming how we think about the relationship between companies and customers, blurring the line between service provider and financial institution in ways that benefit corporate bottom lines.

ACTION

💰 The Gift Card Advantage for Small Businesses

Even without Starbucks' scale, small businesses can implement powerful stored-value strategies:

3 - Simple Steps to Start:

  • Create a basic gift card program with minimum reload amounts slightly above your average transaction

  • Set non-round pricing ($4.75, $9.85) that ensures small leftover balances

  • Offer a modest discount (5-10%) for preloading larger amounts

2 - Key Implementation Tools:

  • A simple point-of-sale system that can track gift card balances (Square, Toast, or Shopify all offer this)

  • A basic customer database to track spending patterns and reload history

1 - Critical Success Factor:

  • Design for both customer benefit and business advantage—your program must genuinely improve the customer experience while creating financial benefits for your business

By implementing even a basic version of Starbucks' model, small businesses can create their own mini "banking" operation that improves cash flow, reduces transaction costs, and builds customer loyalty—all while generating those valuable "breakage" dollars that fall straight to the bottom line.

MEME