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KBW: Apple Pay Issuer Contract Reveals Pricing and Network Authority


Sanjay Sakhrani of Keefe, Bruyette & Woods looked in to Apple Inc.'s (NASDAQ: AAPL) new payment system, Apple Pay.

In a note published on Friday, Sakharni stated that Apple Pay terms and conditions were “in-line” with expectations, but several notable points need to be highlighted.

  • Apple will receive 15 basis points per credit card transaction and half a penny per debit transaction.
  • On behalf of Apple, the networks will collect the portion of interchange owed to the company from the issues and will only then pass along the fees to Apple.
  • Issuers must allow at least 95 percent of the cards in their portfolio to participate in Apple Pay, which may not necessarily include gift cards or ATM-only cards.
  • Apple has the ability to request up to two times a year that the amounts the issuers pay are accurate. Apple reserves the rights to seek advice from independent auditors to verify accuracy.
  • Issuers must supply Apple with various data statistics in nearly three dozen categories, including transaction and purchase volume data, top 100 merchants by purchase volume and average ticket.

Sakharni notes that Visa and MasterCard will play a “large operational role” for Apple which extends beyond the security aspect of tokenization. The analyst adds that this makes both Visa and MasterCard “quite relevant.”


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