Starbucks is a bank (literally)

If you think Starbucks makes its money selling coffee beans, you are missing the bigger picture. In reality, Starbucks is one of the largest "fintech" banks in the world—they just disguise it as a cafe.

Here is how the $1.6 Billion "Gift Card" Strategy works:

• The Interest-Free Loan: When you load $20 onto your Starbucks app, you are effectively lending that money to Starbucks at 0% interest. Right now, customers have deposited over $1.6 billion into the app. Starbucks can use that cash to open new stores or invest, without paying a cent to Wall Street.

• The "Breakage" Profit: Millions of people forget about the last $2 on their gift card or lose the card entirely. In the finance world, this is called "breakage." Last year alone, Starbucks pocketed over $150 million in free profit from money people simply forgot to spend.

• Zero Regulation: Unlike a real bank, Starbucks doesn't have to keep cash reserves or insure your money. It is the ultimate financial hack.

They aren't in the coffee business. They are in the "stored value" business.

The Takeaway

The best business model isn't always selling a product; it's getting paid before you deliver the product.