My understanding is the reference designs are based on ARM (UK) ones, then Apple's chip design team in Israel tweak them to suit Apple's specific device needs. And they're presumably manufactured in China like everything else?
But yes, largely unrelated to Apple Pay, lol! Except perhaps that with decent high tech industry, one might have suspected Israel to have high tech AP before now, too. ;-)
Sounds like the Israeli banks held-out to drive a hard bargain, in order to secure a relatively low 0.05% rate.