PaymentsSource January 11, 2016
Apple Pay is seeing a surge in U.S. bank support, with the number of participating banks rising past 900 with the recent addition of 60 regional and community banks, bringing it closer to full coverage in its home market. But Apple isn't having the same luck everywhere else.
Banks in Canada, Australia and most European markets continue to resist Apple's advances, despite Apple's mobile wallet being considered a must-have feature by industry analysts.
One likely reason is that banks outside the U.S. aren't interested in paying Apple's fees, which are said to be 10 to 15 basis points per transaction. Many U.S. banks agreed to pay the toll when the service launched in October 2014, but many did so reluctantly, with one Citizens Bank exec openly declaring Apple's terms to be "the most one-sided agreement I have ever seen."
So far, the only big welcome Apple Pay has received outside the U.S. is in the U.K., where the largest banks launched Apple Pay in mid-2015. One notable exception is Barclays, which still doesn't support Apple Pay, but observers expect it will come on board this year.
In Canada, only American Express—which has about 7% of Canada's credit card market—supports Apple Pay, and observers say there's no indication Canadian banks are eager to embrace it anytime soon. Meanwhile, Canada's biggest banks, including RBC, are moving forward with proprietary mobile wallets.
And, in light of Apple Pay's lackluster consumer adoption, Apple may find it difficult to replicate the deals it cut with U.S. banks when those contracts expire, he said. "U.S. banks will be looking not just at the international experience, but also at Visa's Digital Enablement Program and MasterCard's Digital Enablement Express and will be seeking terms [for Apple Pay] comparable to other digital wallets," he said.
Apple's success with banks in the U.S. is due largely to the company's efforts to work with several early partners ahead of the mobile wallet's formal launch in October 2014. With major partners like JPMorgan Chase, Bank of America and U.S. Bank already on board, many banks and credit unions scrambled to sign up with Apple to get the same early-mover advantage. Some issuers held out for various reasons — they wanted an Android equivalent, or they wanted Apple Pay to launch in more markets — but they have since come on board.
"Apple did a good job of signing up banks in the U.S., and while 900 is still considerably short of full coverage, in terms of cards and purchasing volume, they are pretty much there," Bareisis said.
U.S. banks are eager to support digital payments, and Apple Pay plays into their strategies. Bareisis noted. In a recent survey Celent conducted of a cross-section of U.S. banks, 60% of banks said they had launched Apple Pay, while 77% of larger banks with assets above $10 billion had adopted it. Another 27% of banks in Celent's survey said they were actively planning to add Apple Pay, and 5% said they had no plans to do so.