Apple faces negotiation hurdles over Apple Pay expansion in Australia

The expansion of Apple Pay into Australia could may not be as early as expected, as the country's four largest banks are unwilling to cut a deal with the Cupertino giant when it comes to fees collected on every transaction. In the US, Apple collects 15 cents for every $100 spent on Apple Pay from its partners, and it is believed that the same deal was put forth to the Australian banks. However, banks are reticent to consider the offer as the payment processing fee is about half of that in the US.

From Financial Review:

Fairfax Media understands fees are a big sticking point in the negotiations, with big banks not willing to give Apple a slice of the $2 billion a year they earn in interchange fees, which are paid by merchants for use of payments infrastructure.In the United States, Apple is believed to earn about 15¢ on every $100 of transactions. It is understood Apple has been asking for the same amount of interchange fee in Australia.But Australia's big banks will not agree to this level given that interchange fees in Australia are about half the US level – equivalent to an average of 50¢ $100 of transaction compared with about $1 for $100 of transaction fees in the US.

Further negotiations will hinge on the interchange fee as the Reserve Bank of Australia is set to push the fee even further to about 30 cents for every $100. There are other factors as well that are preventing the introduction of Apple Pay in the country:

The big banks are also reluctant to open their payments infrastructure to Apple for two other reasons. First, because they are being forced by the RBA to tip hundreds of millions of dollars into building the New Payments Platform, new infrastructure that will have real-time capability, there are concerns about Apple seeking to free ride on this investment.Second, the negotiations are also challenged because banks are concerned about the prospect of Apple getting in between them and their customer at the point of sale, as banks recognise that future revenue growth will come from being the "interface" when customers pay for goods and services, which will allow them to cross-sell products.

Furthermore, banks in Britain were able to strike a bargain with Apple that sees the manufacturer making just a few pence on £100. It is now being reported that a smaller bank would likely collaborate with Apple over the contactless payment service in the country initially.

Source: Australia Financial Review

Harish Jonnalagadda

The clumsiest man in tech.