Apple has negotiated discounts on the card transaction fees for its soon-to-launch payment platform, Bank Innovation’s Ian Kar reports.
According to the report, Apple has reached agreements with American Express, JP Morgan Chase, Citigroup, Capital One, and Bank of America.
Apple’s platform will get what’s called “card present” transaction rates, which is the same rate as when a customer swipes a card at the grocery store.
Online transactions, for example, usually have higher costs because they pose a greater fraud risk.
The banks gave Apple the more favorable rate because Apple was able to convince them that its platform is secure. GPS location data coming from a Near Field Communication (NFC) chip and the iPhone’s Touch ID fingerprint sensor will protect the banks from significant fraud risks.
This is a pretty big deal for the banks, because strictly speaking your card won’t be present when you use Apple’s payment platform.
The banks have to trust that Apple can keep consumer payment information secure.
Discounts for merchants like Apple don’t come along very often. Bank Innovation notes that financial institutions have only cut a similar deal with one other retailer — Walmart.