Under the wide-ranging agreement, Square will begin processing all Starbucks US credit and debit card transactions, significantly expanding the former's scale and cutting the latter's costs.

In addition, from this Autumn Starbucks customers will be able to use the Pay with Square application - which lets users set up tabs linked to their cards and then pay by saying their name at the point-of-sale - at around 7000 stores.

Customers will also be able to use the Square Directory to find local Square businesses from within a variety of Starbucks platforms, including its digital network and eventually its own mobile payment application.

In a letter to merchants, Square founder Jack Dorsey says: "When Starbucks builds the Square Directory into their apps and in-store Digital Network, it gives Square new visibility, driving more customers to opt-in to Square. And with nearly 7000 Starbucks stores soon accepting Square, these new payers will be able to find your business (including coffeehouses) and pay with their name, building community and creating value."

The Square option will be offered alongside Starbucks' own hugely successful mobile applications, which are used to make around a million payments a week.

To bolster its commitment, Starbucks is investing $25 million in Square as part of a series d financing round widely tipped to value Dorsey's firm at $3.25 billion. Starbucks chairman, president and CEO Howard Schultz will join Square's board.

Says Schultz: "The evolving social and digital media platforms and highly innovative and relevant payment capabilities are causing seismic changes in consumer behaviour and creating equally disruptive opportunities for business. Both Starbucks and Square take a similar approach when building products and running our businesses, and together we can bring the best possible payment experience to Starbucks customers."