“Apple Inc. will reap fees from banks when consumers use an iPhone in place of credit and debit cards for purchases, a deal that gives the handset maker a cut of the growing market for mobile payments, according to three people with knowledge of the arrangement,” Elizabeth Dexheimer reports for Bloomberg.
“Under deals reached with banks individually, Cupertino, California-based Apple will collect a fee for each transaction, said one of the people, who requested anonymity because terms aren’t public,” Dexheimer reports. “While that gives the tech company a share of the more than $40 billion that banks generate annually from so-called swipe fees, lenders expect to benefit as consumers spend more of their money via mobile phones and other digital devices, the person said.”
“The mobile-payments market will probably more than quadruple to about $90 billion by 2017, according to Forrester Research. The people familiar with Apple Pay didn’t specify the size of the fee, which they said could vary, or whether it’s tied to the value of purchases,” Dexheimer reports. “In an online introduction to Apple Pay, the company said it won’t charge users, merchants or developers for transactions. Spokesmen for JPMorgan, Bank of America and Citigroup declined to comment on the terms of their deals.”
Read more in the full article here.
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If Apple Pay significantly reduces the fraudulent charges that the credit card issuing banks are saddled with, the banks should be thrilled to pay Apple.
I’m pretty sure from whom the fees will be “raked” and it ain’t the banks.
So you think that the banks will increase their swipe fees? HIGHLY unlikely. They will pay Apple a percentage that will paid from their savings from fraudulent charges.
So in essence you are right, Apple will rake in their fees from criminals, not the banks.
heh. Banks don’t pay fees, they collect them. Criminals aren’t really known for having money.
“Willie, why do you rob banks?”
“Cuz dat’s where da’ money is.”
Who said that it was banks that pay fees? I lay it out for you…
1. Merchants pay fees to credit card company
2. Credit Card Company pays for fraudulent charges
3. With Apple Pay Credit Card Companies will save on fraud expenses and share these savings with Apple.
Hopefully you can count to 3.
Hey there, Mr. Friedman, when merchants are saddled with yet another fee from banks or any overhead expense source, who pays for it?
PS: In what galaxy did any bank pass on savings to its customers? This is the part where you STFU.
Yep you’re right – it will be us suckers that use the cards.
I don’t know if it’s how it works, but I hope it won’t increase the cost to merchants. We’ve started charging for card transactions in our office because so many were showing up as higher rate ones from cashback cards and the like, and it was just becoming unsustainable. Sadly you don’t know what kind of card it is until your statement comes through.
It shouldn’t make a difference to anyone EXCEPT the banks, and like is mentioned earlier, they will likely go along because fraudulent charges should drop tremendously.
Oh no, Apple negotiated deals with multiple companies at once, offering everyone the same exact deal! Start the DOJ lawsuit countdown now. 10…
Yep. Could be a repeat of the book deal idiocy we saw in the courts.
There is another angle to this – Reduced disputed charges.
I can see the credit card companies saying it now, “Sir, this transaction appears legitimate, it’s got your fingerprints all over it.”
ApplePay is just a first step into Apple financial services and a lucrative one it will prove to be.
Can you spell CASH COW?
Not to mention scaring the crap out of PayPal and Amazon and Google. One of their main sources of customer information is about to dry up–when you use Apple Pay to pay them, they will only get your money, NOT all your personal info which is usually more valuable to them!
banc®
Yep.
Exactly
It’s a 4 way win as long as people participate. Consumers, banks, Apple and lots more merchants.
The other thing about Apple Pay, is that it represents HUGE potential returns with very minimal risks. Think about it, why does every retailer–Sears, Nordstrom’s, BestBuy, Car Dealer, Furniture Store, offer credit cards and/or financial services? Because they are completely low risk/mammoth return vehicles.
Now image the profit someone like Sears makes and multiply it by 100X with the scope of Apple.
Even if ApplePay is only “mildly” successful, it is a no-brainer for Apple and a big kick in the groin to Google and Amazon.
Yeah, I’m not sure where Apple’s cut will come from if not from you and me.
At the moment, Vendor charges me $100 and pays $2-$3 to the card provider. When I use ApplePay to make the purchase, is the card provider giving up a piece of their fee to Apple?
not bloody likely, mate.
That’s what the article says.
Yes. Why else would Apple have made deals with them?
Comes out of the vendor’s profits, just like it always has. That’s why some vendors–like Costco–don’t allow credit cards. And most vendors certainly don’t give you a discount if you pay cash.
Do you buy from many vendors who charge 1% – 5% more when you use a credit card?
Didn’t think so.
Apple’s fees will come out of the profit for vendors and the credit card companies, just like they would with your Sears VISA or whatever. Credit card companies are willing to take that hit because of the huge amount of money they can make when you fail to pay your monthly charges.
Costco allows only one credit card, its own, so it keeps the swipe fees. The credit card issuers lobbied legislators to pass laws preventing vendors from offering discounts for cash and from setting reasonable minimum charge limits. The fee is per swipe, regardless of purchase amount. ApplePay unfortunately is going to require expensive investment in reading devices, so small retailers are going to be screwed again as all the savings will go to the big stores that can afford them. I’d like to see Apple use some of its billions to support the leasing of ApplePay readers at low rates.
The thing is banks will reap the reward of far less fraud with much greater security through Pay and businesses like Target and Home Depot will no longer have to worry about getting hacked once the info is just local to the user. That’s money back in the bank. The days of foreign hackers stealing funds online is about to come to an abrupt end.
Good point. These are hard times for Central Park muggers.
True enough. Potential mugee’s with no cash, no credit cards and only a phone that will instantly lock them out. D’Oh!! It’s getting so crime won’t pay!
Oh wait – hello break-in & burglary increases!
having just had yet another hassle using a credit card on travel because of bank fraud prevention lock-downs, i can’t wait for Apple Pay!
Nothing like having MasterCard cut off your ATM or credit card without notice while you’re in the outback in a foreign country. It really makes a vacation fun.
This problem is very prevalent in the US, because the American banks have been very slow in adopting embedded chips in credit cards (coupled with a PIN code). Overseas, it is now practically the only way to pay with a credit card — a hand-held chip reader with a numeric keypad. The chip and PIN combo significantly reduces the ability of thieves to just get the card number and abuse it. Because of the slow adoption of this feature, American banks are writing off over $7 billion every year, more than the rest of the world combined.
ApplePay has a chance of reducing this number significantly.
MC noticed that my ATM card was being used in (Horrors!) Canada! They called my home to verify the purchases, but I wasn’t home BECAUSE I WAS IN CANADA, so they stopped the card. Brilliant!
Yeah you won’t have to call your bank in advance to tell them you’ll be out of town using your credit cards out of your usual area.
The Auditor General of Canada Michael Ferguson said in a report in 2014 that due to the withdrawal of the questionnaire, the government is less familiar to Canadians.