Banks Pressuring Visa to Cut Back on Apple Pay Fees

[MacRumors]

A number of banks are currently pressuring Visa to make changes to the way it processes some payments made via Apple Pay, moves that would reduce the fees the banks pay to Apple for certain transactions, reports The Wall Street Journal.

At the heart of the issue are automatic recurring payments like memberships and streaming services. Visa is aiming to change the way it issues tokens for Apple Pay cards such that Apple would only receive a transaction fee on an initial subscription payment and not on subsequent transactions.

When Apple introduced Apple Pay in 2014, the iPhone had already clobbered music players, cameras and GPS systems. Banks and card networks worried it also would displace card payments.

Banks agreed to pay Apple 0.15% of each purchase made by their credit cardholders. (They pay a separate fee on debit-card transactions.) Those fees account for most of the revenue that Apple makes from its digital wallet, according to people familiar with the matter.

Aside from the fee arrangement, Apple garnered several other concessions from credit card issuers as it rolled out Apple Pay, and in exchange, Apple agreed not to launch its own credit card network to go up against Visa and Mastercard.

With the launch of Apple Card in partnership with Goldman Sachs, Apple has become more of a direct competitor to other banks, and some bank executives have reportedly been angered by Apple's move and are seeking ways to reduce the payments they make to Apple.

Apple has unsurprisingly informed Visa that it objects to the proposed change that would reduce the fees it receives on recurring transactions, so it remains to be seen whether Visa will follow through on its plans, which are scheduled to go into effect next year.

Article Link: Banks Pressuring Visa to Cut Back on Apple Pay Fees

 

[now i see it]

My eyes glazed over after reading the title

 

[brianjlambert]

Yet, the banks get the benefit of a secure transaction that’s verified biometrically. They’d rather take a loss on used stolen cards than give anyone else a fraction of a percent more to have a secure payment.

 

[dguisinger]

I'm honestly tired of everyone taking cuts on the flowing of money - someone always has to pay for it in the end.

If only we all had cash in the bank and could ACH it for FREE. But no, as soon as its a credit card, someone has to pay for the transactions. Visa and MasterCard don't do anything other than pass transaction numbers around, yet make 3%. Apple's 0.15% seems more reasonable, though they too are only passing numbers back and forth to facilitate a transaction they had nothing to do with.

 

[TheYayAreaLiving 🎗️]

The banks have enough money. Come on now. They make enough profit on interests alone.

 

[jav6454]

What are the changes Visa is making to ApplePay fees? I understand they affect banks, but how much did it affect them?

 

[Stella]

The banks have enough money. Come on now. They make enough profit on interests alone.

Same could be said about Apple too...

If concessions were made to Apple when Apple Pay was released, it's high time those concessions were now dropped.

Apple Pay is now established, probably time those concessions were dropped. Apple Pay will and can live on it's own two feet.

 

[mookc1]

Visa should thank Apple for further securing transactions.

 

[mannyvel]

The benefit of Apple Pay is the risk of fraud is substantially less. The same can be said with the Apple Card. That alone is worth the .15%.

It's interesting that Visa is saying they're getting squeezed by other card issuers. That sounds like a money grab by Visa, since other issuers will also have the same change applied to them.

And in any case the change makes no sense. A transaction is a transaction. Whether it's a subscription or not makes no difference.

Edit: one other interesting thing is that the article talks about banks. Really, they should be called "card issuers", who are not necessarily banks. Or is the article saying that bank-based issuers pay the fees and the non-bank ones do not?

 

[WiseAJ]

Same could be said about Apple too...

If concessions were made to Apple when Apple Pay was released, it's high time those concessions were now dropped.

Apple Pay is now established, probably time those concessions were dropped. Apple Pay will and can live on it's own two feet.

If those concessions are dropped then Apple should also then be free to start their own card network.

Don’t want to play ball VISA? Fine, Apple can take their ball and start their own game without you.

 

[_Spinn_]

Yet, the banks get the benefit of a secure transaction that’s verified biometrically. They’d rather take a loss on used stolen cards than give anyone else a fraction of a percent more to have a secure payment.

Yeah this is dumb. The big benefit provided by ApplePay is extra security. The banks were supposed to make up the fees due to fewer losses because of fraudulent charges.

 

[R3k]

Screw the banks, they've had their chance to move things forward, innovate, compete and they just tried to keep things stuck.

It took Apple and a pandemic for wireless payments to become a common thing in the city I live.

Also, I just spent 9 months working in Europe. Before I would need to pay everything in cash, losing $10 for the withdrawal otherwise I would have to pay with credit card which brought a $5+ fee for every transaction.

With Apple Pay- 0 fees, and the waiter just comes to the table with a handheld scanner, I point my phone, all done, 2% cash back.

 

[a m u n]

Typical card processing fees are around 3%, and they’re unhappy that Apple gets 0.15% (1/20th)? 😅

 

[Shreducator]

My understanding was Apple Pay has helped banks lower their insurance rates.

 

[KindJamz]

The banks have enough money. Come on now. They make enough profit on interests alone.

So does apple.

 

[Stella]

Screw the banks, they've had their chance to move things forward, innovate, compete and they just tried to keep things stuck.

It took Apple and a pandemic for wireless payments to become a common thing in the city I live.

Also, I just spent 9 months working in Europe. Before I would need to pay everything in cash, losing $10 for the withdrawal otherwise I would have to pay with credit card which brought a $5+ fee for every transaction.

With Apple Pay- 0 fees, and the waiter just comes to the table with a handheld scanner, I point my phone, all done, 2% cash back.

Which city do you live in?

We've been able to Tap Debit / credit / Apple / Android Pay for years at the majority of locations, shops, restaurants. It's the minority of places that don't accept touchless payments. It didn't take a pandemic. Touchless payments have been common place for years.

 

[steevn]

All these fees get passed on to consumers anyways. I believe Apple and all issuers need to reduce their fees but let’s not pretend the banks or businesses are paying these fees themselves.

 

[BC2009]

Screw the banks, they've had their chance to move things forward, innovate, compete and they just tried to keep things stuck.

It took Apple and a pandemic for wireless payments to become a common thing in the city I live.

Also, I just spent 9 months working in Europe. Before I would need to pay everything in cash, losing $10 for the withdrawal otherwise I would have to pay with credit card which brought a $5+ fee for every transaction.

With Apple Pay- 0 fees, and the waiter just comes to the table with a handheld scanner, I point my phone, all done, 2% cash back.

Point your Apple Watch instead -- it is the far better way to use Apple Pay -- no Face ID required since the watch was unlocked when it was put on your wrist and remains unlocked until you take it off. Even better, you don't have to go reaching into your pocket to retrieve it since it is already on your wrist.

That said, I agree that the card issuers / banks are just being greedy whiners. I can see the argument that on a recurring subscription Apple is not doing anything more to secure the transaction since the first transaction was already secured with an Apple device, but on the same note banks have been taking huge fees for years on credit card transactions -- so much so that they can offer as much as 2% cash back on all transactions and 4% on specific categories of transactions without losing money. Quibbling over Apple's 5% cut of their 3% transaction fee (i.e.: 5% of 3% is 0.15%) seems silly -- especially when you consider the reduction in fraud provided by Apple Pay.

It's always funny when the middle man complains about somebody being a middle man.

 

[mookc1]

It would be interesting to know the fraud rate of Apple Pay versus other pay methods and in card present vs card not present transactions. The only part of the DAN that we (card holders) can see for an ApplePay transaction is the last 4 digits of the card. Fraud must be significantly lower with ApplePay.

 

[MNGR]

Why do people keep expecting something for nothing?
A transaction takes place which requires all the piece parts to work together.
So the “banks” want Apple’s part to be free?

 

[gavroche]

I'm honestly tired of everyone taking cuts on the flowing of money - someone always has to pay for it in the end.

If only we all had cash in the bank and could ACH it for FREE. But no, as soon as its a credit card, someone has to pay for the transactions. Visa and MasterCard don't do anything other than pass transaction numbers around, yet make 3%. Apple's 0.15% seems more reasonable, though they too are only passing numbers back and forth to facilitate a transaction they had nothing to do with.

What I hate more is that their technology is perfectly capable of handling purchases instantaneously, but refunds take them 2-3 business days for their system to process.

 

[gregmancuso]

A number of banks are currently pressuring Visa to make changes to the way it processes some payments made via Apple Pay, moves that would reduce the fees the banks pay to Apple for certain transactions, reports The Wall Street Journal.

At the heart of the issue are automatic recurring payments like memberships and streaming services. Visa is aiming to change the way it issues tokens for Apple Pay cards such that Apple would only receive a transaction fee on an initial subscription payment and not on subsequent transactions.

Key points here - banks are pressuring Visa to change the way that the tokens are issued to the banks only have to pay the 0.15% on the initial purchase.

Reading this it sounds like the banks are trying to get Visa to do something that basically says the recurring charge is not really a charge so no fee is required. Millions of people use credit cards for recurring payments - utility / cable / phone bills, streaming services, magazine subscriptions, rent. Are not every one of those monthly transactions not a transaction? Would the banks not still have to pay Visa for the transaction?

If the transaction is being processed via my Apple Card account I would expect that the service fee applies.

This is another story of banks arguing with banks with absolutely no impact to the consumer. None of the monthly bills will reduce by 0.15% that the banks would not have to pay.

 

[rjohnstone]

Since Apple blocks NFC access, banks really have no choice but to use Apple's secure payment system and wallet.

As for Apple starting their own network... that's laughable. The cost and time to build it out, obtain issuers and get card processors interconnected is a monumental task.
Oh and Apple will have the joy of falling under federal banking regulations and undergo regular audits.
Riding on the coat tails of existing banks is more Apple's speed.

 

[rjohnstone]

Key points here - banks are pressuring Visa to change the way that the tokens are issued to the banks only have to pay the 0.15% on the initial purchase.

Reading this it sounds like the banks are trying to get Visa to do something that basically says the recurring charge is not really a charge so no fee is required. Millions of people use credit cards for recurring payments - utility / cable / phone bills, streaming services, magazine subscriptions, rent. Are not every one of those monthly transactions not a transaction? Would the banks not still have to pay Visa for the transaction?

If the transaction is being processed via my Apple Card account I would expect that the service fee applies.

This is another story of banks arguing with banks with absolutely no impact to the consumer. None of the monthly bills will reduce by 0.15% that the banks would not have to pay.

No.. Visa wants to issue the token for recurring payments themselves. Apple Pay is only really needed for the initial transaction. Reoccurring billing doesn't require Apple Pay at all to remain secure. Once the payment is setup, billing doesn't need to pass through Apple Pay. It can be direct between merchant and the issuing bank.
There will still be a service fee on each transaction, they're just cutting Apple out as the middleman since they really don't need them beyond the initial transaction.

 

[Radeon85]

Apple should threaten them by saying they'll open their own bank. Bet they wouldn't mind the fees then instead of loosing a lot of their customers.

Would probably be a nightmare to start one with all the legal issues but if they wanted to and even managed to get one going I'd certainly switch.