After being rumored to be in talks with credit card issuers American Express, MasterCard, and Visa, Apple is now said to be in talks with some of the largest financial institutions to negotiate discounts on payment processing. The iPhone-maker is now speculated to be in talks with American Express, JP Morgan Chase, Citigroup, Capital One, and Bank of America to ink agreements for credit card processing.
The iPhone 6, which is expected to be announced in a few short days, is believed to come with an NFC chip that would allow Apple's latest smartphone to be used as a digital wallet allowing customers to pay for goods inside retail stores. The financial deals that are speculated to be in the works would allow Apple to process transactions at a lower cost thanks the presence of added security with Touch ID and NFC chips.
In addition to bumping down the card rates, Apple is also working on having the iPhone be recognized as a credit card:
The first thing Apple has done is convince these four FIs to consider transactions from Apple's upcoming payments venture — said to launch with its forthcoming iPhone 6 introduction — as "card present" transactions, which carry a lower discount rate than "card not present" transactions, because of lower fraud risk.
Apple wants the iPhone to be processed as a "card present," which would mean a lower transaction rate. The iPhone-maker may even assume some of the risks by using the biometric TouchID and NFC chip to authenticate customers.
"This is essentially a wash for the financial services industry: they lowered fees for Apple for the privilege of being included in Apple's payments initiative, but managed to put some of the transaction risk to Apple," the report says.
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Source: Bank Innovation