Bank chief executives fawned about the “exceptional customer experience” and the “exciting move”.
They are also paying hard cash for the privilege of being involved: 15 cents of a $100 purchase will go to the iPhone maker, according to two people familiar with the terms of the agreement, which are not public. That is an unprecedented deal, giving Apple a share of the payments’ economics that rivals such as Google do not get for their services.
“That makes Apple Pay unique,” says Dickson Chu, chief product officer at start-up Ingo Money, who worked at PayPal and, while at Citigroup, on the Google Wallet. “It’s somewhat surprising that Apple was able to negotiate something Google couldn’t.”
It's said that Apple was able to convince so many partners to come on board with Apple Pay because it wasn't disruptive to their business - at least for the time being. Apple’s model “still puts us at the center of payments”, said one bank executive.
Banks may also be willing to lose some revenue in hope that Apple Pay will become popular, driving up transactions volumes and revenue. Also key is the belief that it could significantly reduce fraud through security improvements.
Finally, the service could increase online shopping by giving customers a simple Apple Pay button instead of requiring the need to input credit card information which is tedious, especially on a mobile device.
If you haven't already seen Apple Pay in action, click here to watch a hands-on video. You can also learn more about the service here.
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