Stalled Visa plan to cut Apple Pay fees causing tension with card issuers

AppleInsiderAppleInsider
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Banks and credit card issuers are at odds with Apple over some of the charges that apply to Apple Pay transactions, with Visa backing out of one change that would have cut fees paid to Apple for recurring payments.




Transactions that occur through Apple Pay has Apple taking a small fee from the banks, as a way to pay for the service's operation. However, it appears that banks are getting restless over how much they pay to Apple for Apple Pay transactions in general.

The unrest prompted Visa to propose a change to how it handled repeat transactions, such as gym memberships and payments to streaming services, according to sources and a document seen by The Wall Street Journal. Under the plans, this would have involved cutting the cost of transaction fees that would be paid out by banks, including those to Apple for Apple Pay-derived payments.

For Apple Pay transactions, Visa issued a token that replaced the card number to perform the transaction, which is used to secure the transaction. The plan would have had Visa using a different token for recurring payments, and that Apple would get the fee for the first payment of a subscription, but not subsequent payments.

However, while it was originally targeted for implementation in 2022, Apple executives reportedly opposed the plan, with Visa now in discussions with the iPhone maker. The plan has seemingly stalled, and may not end up being implemented.

The disagreement is a continuation of ongoing tensions between the finance industry and tech companies, especially for those like Apple, Amazon, and Google who perform consumer payments.

In the case of Apple, it has gained numerous benefits over its rivals, often at the perceived expense of financial institutions.

For example, Visa and Mastercard agreed to allow Apple to choose which card issuers it would allow to use Apple Pay, as well as their specific cards. Normally, Visa and Mastercard would require any such payment processors to accept all card issuers or none at all, but the concession was made to stop Apple from developing its own competing card network.

Also, banks are required to pay a 0.15% fee of purchases made by credit cards through Apple Pay, and a similar charge for debit card transactions. Meanwhile, banks don't pay those same fees to Google for its own digital wallet usage.

Card issuers were also reportedly unhappy with Apple's decision to launch Apple Card, with sources saying it turned Apple into more of a direct competitor.

In Australia, the unrest has led to the head of the Commonwealth Bank of Australia openly criticizing claims by Apple that it is being pro-competition regarding Apple Pay. The dispute there is in relation to allowing competitors to use NFC on the iPhone, so that banks and card issuers can provide similar payments without paying Apple Pay fees.

Apple insisted in a statement to the report that "our banking partners are an important part of Apple Pay's growth," and that they "continue to see the benefits of providing Apple Pay and invest in new ways to implement and promote Apple Pay to their customers for secure and private in-store and online purchases."



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Comments

  • Reply 1 of 7
    22july201322july2013 Posts: 3,571member
    AppleInsider said:
    Card issuers were also reportedly unhappy with Apple's decision to launch Apple Card, with sources saying it turned Apple into more of a direct competitor.
    When Apple Card becomes available in Canada, you bet your sweet patootie I'm gonna jump from all the current bank-based card issuers. If Apple created its own bank, or cellphone network, or ISP, or car, or credit card company, I would also jump ship to those as well. That's because those companies have (in my opinion) never done what's best for me, but only for themselves. I often wonder why Apple doesn't branch out into those fields. Is Apple too fearful to branch out into new business lines?
  • Reply 2 of 7
    sflocalsflocal Posts: 6,093member
    ApplePay has brought me peace of mind in terms of security.  Prior to ApplePay, I would have to get a replacement card by my bank due to fraudulent charges.  With ApplePay being accepted just about everywhere, I haven't had to get a new card in years.  

    That fee that Apple charges to banks I'm sure is far, far cheaper than dealing with fraudulent charges and reimbursements.  It's a cheap insurance policy as far as I'm concerned.  Banks have a horrible track record of keeping my financial data secure.  I trust Apple more than I would any bank.

    As much as I want an AppleCard, I prefer my current visa for airline miles that I use frequently.
    gregoriusmStrangeDaysmarklark
  • Reply 3 of 7
    MustSeeUHDTVMustSeeUHDTV Posts: 304member
    "banks are required to pay a 0.15% fee of purchases made by credit cards through Apple Pay"

    Wow, I thought it would be a lot more than that. Surprised there are complaints. Only when it gets to the hundreds of millions to Billions is it lot. For example, it is 450,000 for 300M.
  • Reply 4 of 7
    StrangeDaysStrangeDays Posts: 12,877member
    Not mentioned in this article, but at launch it was explained the fee banks paid was less than what they spent on fraudulent transactions, which is why they supported it — use of tokenized Apple Pay saves the banks money.
    muthuk_vanalingamGeorgeBMacmarklark
  • Reply 5 of 7
    dcgoodcgoo Posts: 280member
    Card issuers were also reportedly unhappy with Apple's decision to launch Apple Card, with sources saying it turned Apple into more of a direct competitor.
    When Apple Card becomes available in Canada, you bet your sweet patootie I'm gonna jump from all the current bank-based card issuers. If Apple created its own bank, or cellphone network, or ISP, or car, or credit card company, I would also jump ship to those as well. That's because those companies have (in my opinion) never done what's best for me, but only for themselves. I often wonder why Apple doesn't branch out into those fields. Is Apple too fearful to branch out into new business lines?
    Apple Card in .us is a bank issued card too. 
    edited October 2021 muthuk_vanalingam
  • Reply 6 of 7
    GeorgeBMacGeorgeBMac Posts: 11,421member
    StrangeDays said:
    Not mentioned in this article, but at launch it was explained the fee banks paid was less than what they spent on fraudulent transactions, which is why they supported it — use of tokenized Apple Pay saves the banks money.

    True!
    But now that they are putting out their own 'tap to pay' cards, do they now have the same level of security?
    (and I mean that as a question rather than rhetorically).

    Interestingly I'm getting push from Chase to start tapping my Chase card -- while Discover is encouraging me to use ApplePay.

    It's hard to tell what's going on under the covers.
    But, one thing is for certain:   digital payments will only get more popular and the banksters (as well as cryptocurrencies) are fighting multiple wars to stay or to climb to the top.  So far the fighting has been gentlemanly but I suspect it will get increasingly cut-throat and vicious.
  • Reply 7 of 7
    rcfarcfa Posts: 1,124member
    0.15% is nothing compared to the 2-5% they themselves charge vendors for transactions.
    Given that ApplePay helps cut down on incorrect charges, card fraud, card wear, lost cards, etc. causing expenses/losses and administrative overhead, the card companies may actually come out ahead.

    The last thing they should do, is bitch, because someone might get the idea that splitting fees equally between all parties involved in a transaction might be fair, which would radically increase Apple’s cut.
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