The morning cuppa is now just a click away. The world's biggest coffee chain - Starbucks - has tied up with Square Inc. for its mobile app "Pay With Square". As part of the deal, which was announced on Wednesday, Aug. 8, the Seattle-based Starbucks Corp. will also be investing $25 million in Square Inc. Starbucks will also pay a fee to Square for its systems; however, the two companies did not divulge the details.

Based in San Francisco, two-year old Square is the brainchild of Jack Dorsey who is the co-founder of micro-blogging site Twitter Inc. Per the alliance, Starbucks will be using Square's smartphone technology and other services to replace transaction systems in its U.S. coffee shops. Square will process all of Starbucks' credit and debit card-based transactions, but not cash. Consumers will be able to pay by simply waving a Square app on their phones in front of the barcode reader at store counters.

Currently, according to a reliable source, Starbucks employs payment-processing services of a bank. The source declined to divulge the bank's name.

Additionally, Starbucks' CEO Howard Schultz will be joining Square's board. Schultz opined that Square's "approach" made it stand out from PayPal and Google Wallet.

"What we found with Square was an approach to the customer that was quite different. This is not a bolt-on strategy. This is the only thing they do," said Howard Schultz.

Despite being relatively new on the block, Square has made steady inroads into the retail industry and is poised to thwart competition from established payment processors like PayPal and Google Wallet. Starbucks's partnership with the mobile payments start-up is a major step for Square.

"This is definitely a pioneering deal for us. It really validates the technology," said Jack Dorsey.

Dorsey also went on to aver that Square intended to use a portion of the $25 million Starbucks investment to expand its reach and will foray outside the U.S.

With the "Pay With Square" mobile app in its kitty, Starbucks is gearing up to stay ahead in the retail race. However, a mobile payments system is not new to the company. In early 2011, the company released a mobile phone app that allowed users load money onto smartphones. The app was then scanned at the cash register to process payments. The app now touts more than 1 million mobile transactions in a single week (in the U.S.), according to CEO Schultz. Starbucks has 7,000 coffee shops in the U.S. and Schultz averred that the app's popularity had grown faster than any other Starbucks innovation.

Schultz also said that the tie-up would reduce payment processing fees, but he did not disclose the figure. Currently, Square only charges a 2.75 per cent transaction fee vis-à-vis the more expensive conventional credit card processors.

Credit card issuers too are welcoming the deal. "Square is enabling transactions to flow electronically. That's always good," said Visa Inc. CEO Joe Saunders.

With technology playing a pivotal role in the consumer space, mobile devices are slowly assuming a centrifugal role and impact our day-to-day lives. Demand for systems that allow people to pay via mobile devices is on the rise, in the process laying open the field for a technology battle.