The details of Apple’s “commercial agreement” with credit card companies and issuing banks for processing Apple Pay payments has been largely a secret, but one equities analyst appears to have gotten his hands on a copy of the terms, and he’s published the main points.
Sanjay Sakhrani of Keefe, Bruyette & Woods wrote the brief, in which he commented that he thought the fees Apple is collecting for Apple Pay payments are about what he expected.
According to the term sheet, Apple will receive 15 basis points (0.15 percent) per credit card transaction, as well as a half a penny per debit transaction, Sakhrani writes.
The credit card networks will collect Apple’s transaction fees from the card-issuing banks, then pass the money off to Apple.
Apple is requiring card-issuing banks to allow at least 95 percent of MasterCard or Visa cards in their portfolio to participate in Apple Pay, Sakhrani’s report reads.
Card-issuing banks must also collect a lot of operational data for Apple. The term sheet lays out data points in “almost three dozen” categories, Sakhrani writes. The data include things like purchase volume data for both debit and credit cards, in-store vs. in-app purchase mix, the top 100 merchants by purchase volume, and the average purchase amount.
Sakhrani expressed surprise at how tight the relationships between Apple and the credit card companies and issuing banks appear to be.
He also believes that the credit card companies (Visa, MasterCard, and American Express) are highly involved in processing payments. “Visa and MasterCard, beyond the security aspect of tokenization, seem to be playing a large operational role for Apple in the platform, which is interesting and makes them quite relevant,” he writes.
Apple Pay works only on the iPhone 6 for in-store payments, yet Apple signed up a million people to use the service in the first 48 hours it was available.