Apple cuts a big break with banks for mobile payments

An 'EasyPay' concept that imagines how Apple could handle mobile payments.

An ‘EasyPay’ concept that imagines how Apple could handle mobile payments.

The five largest banks in the U.S. have reportedly struck a special deal with Apple for its upcoming mobile payment platform.

According to Bank Innovation, Apple has managed to negotiate a lower transaction fee with American Express, JP Morgan Chase, Citigroup, Capital One, and Bank of America. How? By convincing them that Touch ID and location-aware NFC will make its mobile payments more secure.

“The first thing Apple has done is convince these four FIs to consider transactions from Apple’s upcoming payments venture — said to launch with its forthcoming iPhone 6 introduction — as “card present” transactions, which carry a lower discount rate than “card not present” transactions, because of lower fraud risk.”

Online transactions through services like Amazon would be considered “card not present,” and therefore banks assume more fraud liability. By pitching Touch ID fingerprint authentication data stored in a secure enclave, Apple has managed to convince the banks that paying with its system is equivalent (if not safer) than swiping a physical card.

Tim Cook has previously said that Touch ID was designed with authenticating mobile payments in mind. He called it a big “opportunity” given the 800 million credit cards Apple has on file with iTunes.

Apple has also convinced the banks to give an extra 10% discount on the “card present” processing rate, which only Walmart has been able to get until this point. The break Apple is getting from the banks is expected to save the company millions.

Today The Wall Street Journal and New York Times reported that the iWatch will also have NFC for processing mobile payments, but it’s unclear whether a wearable was part of Apple’s discussions with banks. If it was, the iWatch would assumedly have Touch ID as well.

Bank Innovation previously said that Apple is partnering with Nordstrom to support its mobile payments platform at launch.

About the author

Alex HeathAlex Heath is a staff writer at Cult of Mac and co-host of the CultCast. He has been quoted by the likes of the BBC, KRON 4 News, and books like "ICONIC: A Photographic Tribute to Apple Innovation." If you want to pitch a story, share a tip, or just get in touch, additional contact information is available on his personal site. Twitter always works too.

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