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.

  • Sounds like it’s shaping up to be a US-only launch. Hope they don’t make contactless-payments a major selling point if they’re only going to be available to US customers? If so they best ink deals with other banks in europe, and quickly. I don’t think people will be happy waiting too long for such a big feature.

    I don’t know what percentage of all iPhones are sold in the US, but I’m gonna say no more than 30%… that’s potentially a lot of users that will be without.

    Most of us are still waiting for iTunes Radio to arrive… though that could change soon.

    • aaloo

      Bro I hear you. But it’s not apple’s fault. It’s your country’s laws thy make it harder to get things done. We are still waiting on iTunes Radio in Canada because of the silly variation of licensing laws.

      • I think it the instance of iTunes radio, it’s more to do with record companies etc.

        With payments though, I know that’s going to be a lot trickier… I just think that if *anybody* is going to win in mobile payments they’re going to have to launch big or expand quickly for it to catch on. It’s not point making a hype about how you may be able to do it in 6 months time. People will forget. At launch it should include US, Canada, UK, France, Germany, Australia and some of the asian markets too.

  • AAPL_@_$101_Is_A_Done_Deal_:)

    Suck it, Hargreaves & Pac Crest. I’m gonna ride it out with Apple. You can convince the trusting chumps to sell their Apple stock.

  • bizdev

    Math is wrong on the receipt.