Chinese site Caixin reports that Apple has agreed to take much smaller fees from banks in China compared to the US as the company this month launches its Apple Pay payments service in the country.
The deal with Chinese banks will see Apple get around 0.07 percent per transaction, according to the report citing unnamed sources, compared to approximately 0.15 percent it’s charging banks in the US.
Apple Inc. will earn fees from Chinese banks when customers use its mobile payment service for purchases, but they will be about half of what the U.S. tech giant charges in the United States, people with knowledge of the matter say… Apple will start collecting the fees in two years. Apple started negotiating with major Chinese banks and UnionPay over profit-sharing and technical issues in 2014. The talks stalled, apparently because Chinese banks argued the charges were too steep.
Caixin adds that sources say new banks signing on with Apple in to support Apple Pay in the country might not get the same lower fee and that the agreement with the initial launch group of banks was “a result of compromise from both sides” in an effort to get the service launched.
“These 19 banks will pay Apple the fees at a discount, but banks that get on board later may not have the leverage anymore,” a person with the knowledge of the mater said.
The report follows an official launch of Apple Pay in China last with card issuer China UnionPay and around 19 banks. The launch saw a rush of around 10 million users signing up in the first hour, according to local reports, and close to 40 million on day one. Apple is going up against Chinese market leader Alipay, reported to have approximately 400M users.
The launch of Apple Pay in China adds it to the list of supported Apple Pay countries alongside the US, the UK, Canada, and Australia.
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The most interesting part is the two year delay in collection of fees. I think this is smart on Apple’s part. Get your foot in the door and see what happens. It does increase the number of users of NFC/Contactless globally which is good.
Apple will probably have to do much the same if they want Apple Pay in Australia and New Zealand. The case for Apple Pay is less persuasive here because we have had chip cards with “tap and go” for ages and the bank interchange fees are lower here than in the US. The use of chip cards no doubt means much lower instances of fraud – and it is the promised reduction in card fraud, as I understand it, that is the main selling point of Apple Pay in the US. The Aussie banks, who run the card payment system, don’t have any incentive to support Apple Pay – and, at this point, don’t.
I have Apple Pay for Amex on my iPhone but it is more convenient, faster, and more reliable to use my Amex card – Sometimes it takes me three or four attempts to get Apple Pay up on the phone – most of the time touch-ID just opens the phone rather than bringing up Apple Pay and then i have to close it and start again… Perhaps when Apple Pay handles store cards and debit cards it will be more useful – but most Aussies carry a wallet anyway (driver’s licence) and we don’t have the multitude of credit cards that some Americans seem to acquire… I only have two credit cards plus a debit card (issued by my bank and not connected to Visa or Mastercard).
And I am much more likely to be in a store without my phone than my wallet…
I should add that, as far as I am aware, Apple Pay ONLY supports American Express in Australia at this stage.
curiously, my posts are reported as 15 hours old as soon as I hit the enter key. Which is curious because we are actually a day ahead – being 10:25am on Tuesday here and 6:25pm on Monday in the US where, I assume, this site is housed…
As I always say, whenever anyone says the same thing about the time difference, 9to5Mac uses Apple’s Time Machine which allows for comments to be posted almost one entire day into the past.
All you have to do is hold your phone to the reader and it’ll light up. You don’t have to launch it manually.
Stating that the Chinese banks will pay a rate that is about half of that paid by U.S. banks is meaningless unless you know what rate Chinese banks already pay to conventional credit card operators.
There are many aspects of life in the U.S. where people are charged rates that are far in excess of those charged in other countries. Some that immediately come to mind are cellphone services, HD television, ATM charges ( I pay no withdrawal fee whatsoever – even when I withdraw cash in the U.S. ) and bank charges in general.