Apple halved transaction fee to get Apple Pay into China, report says

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in iPhone
In order to launch Apple Pay in the lucrative China market, Apple agreed to halve its normal transaction fee for the country's banks, a report said on Monday.




Whereas Apple is thought to claim about 0.15 percent per transaction in the U.S., the equivalent fee is approximately 0.07 percent in China, sources informed Caixin. American merchants can sometimes pay up to 2 percent in overall fees for a card transaction, but in China, the total can be as low as 0.38 percent -- making an extra 0.15 percent a comparatively large burden.

High fees are believed have been the major resistance point in negotiations during 2015. Apple ultimately announced a deal in December, and launched the payment platform with 19 Chinese banks on Feb. 18, though not all partners are yet live.

Sign-up demand was intense enough on Thursday that a number of people ran into error messages when trying to add cards. Traffic has since stabilized.

Apple has suggested that China could eventually become the largest market for Apple Pay. The service is currently available in just a handful of regions, the others being the U.S., the U.K., Canada, and Australia. In the latter two countries it can only be used with American Express cards, which aren't commonplace. Spain, Singapore, and Hong Kong are among planned expansions.

Comments

  • Reply 1 of 12
    slurpyslurpy Posts: 5,144member
    Makes sense. Apple Pay isn't important to Apple because of the revenue it brings in (which is not materially significant), but because of the value, convenience, and stickiness that it adds to its products and ecosystem. 
    lostkiwiRayz2016cornchip
  • Reply 2 of 12
    Thanks Apple. Now reduce fees for Australia please where the banks also (apparently) take a smaller cut than the 2% in the USA.
    lostkiwistompy
  • Reply 3 of 12
    I hope Apple can make the same concessions in Canada and elsewhere to help increase usage globally. 
    lostkiwistompy
  • Reply 4 of 12
    calicali Posts: 3,495member
    I don't get why you guys think Apple will suddenly go cheap worldwide, that's why this type of news is bad and I'm very surprised it's being reported.
    China is a strict market so they had to go cheaper but they're HUGE so a small fee is still a great deal when your population is over a billion.
    edited February 2016
  • Reply 5 of 12
    anomeanome Posts: 1,269member
    It probably is just a matter of volume - .07% times the Chinese user base is a lot bigger than .15% of, say, the Australian user base. Which is a pain for us, because they probably won't want to go to Westpac or NAB with this offer, especially as they have already negotiated the deal with AmEx.

    And it's a pain for Apple, as it gives the banks a new talking point: "You changed it for China, why not for us?" Telling them it's because of the volume of the market is just going to get them to say "Apple don't care about Australia", and take the moral high ground.

    It would be good for consumers if they were a bit more flexible in their rates, but something big is going to need to happen before they will.
    kevin keeksecRayz2016
  • Reply 6 of 12
    ksecksec Posts: 1,559member
    I am not sure if this apply to every countries, but there is a cap per transaction. i.e A million dollar purchase on credit card would not give 20K to Visa for processing fees.
    And you can simply tell by e-commence volume, the biggest week of Taobao is bigger then Ebay US yearly revenue.  
  • Reply 7 of 12
    Rayz2016Rayz2016 Posts: 4,593member
    Thanks Apple. Now reduce fees for Australia please where the banks also (apparently) take a smaller cut than the 2% in the USA.

    And they will, if they feel the Australian market is worth making such a concession for.
  • Reply 8 of 12
    Interesting that when it comes to Apple Pay they are willing to go cheap and make it up in volume.
  • Reply 9 of 12
    cnocbuicnocbui Posts: 3,613member
    cali said:
    I don't get why you guys think Apple will suddenly go cheap worldwide, that's why this type of news is bad and I'm very surprised it's being reported.
    China is a strict market so they had to go cheaper but they're HUGE so a small fee is still a great deal when your population is over a billion.
    Because if they don't, Apple Pay won't be an option in those countries; like Australia.

    There simply is not the slightest incentive for established operators to let Apple free load on their infrastructure and take revenue from them.  They are not stupid.
  • Reply 10 of 12
    josujosu Posts: 217member
    slurpy said:
    Makes sense. Apple Pay isn't important to Apple because of the revenue it brings in (which is not materially significant), but because of the value, convenience, and stickiness that it adds to its products and ecosystem. 
    If Apple have to grow its revenue by services ApplePay is key to that. But this time Apple is betting that volume and widespread access is better than a bigger fee.
  • Reply 11 of 12
    As a consumer I've already shifted about $2k per month in personal purchases over to Apple Pay via AMEX.  

    That's because my old slow credit union does not yet provide this on their debit card.  Hopefully they get in gear before I move the accounts to a competing credit union that does already offer Apple Pay.

    Collectively we shall see if volume matters
    edited February 2016 cornchip
  • Reply 12 of 12
    brucemcbrucemc Posts: 1,527member
    Thanks Apple. Now reduce fees for Australia please where the banks also (apparently) take a smaller cut than the 2% in the USA.
    The rate reported in the USA is "0.15%" - a very long way from 2% - meaning for credit card transactions (where say the total is 3-4%), even at the USA rate, what Apple is taking is quite small compared with the rest of the fees.  For a reduction in fraud, it seems the USA banks are OK with the rate.
    edited February 2016
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