updated 04:45 pm EDT, Thu September 4, 2014
Company allegedly assuming some fraud risk
In preparation for its mobile payment technology, Apple has successfully negotiated deals with five major financial institutions -- American Express, JP Morgan Chase, Citigroup, Capital One, and Bank of America -- to lower transaction fees, sources say. One linchpin was convincing them that mobile payments constitute "card present" transactions, which have a lower discount rate than their opposite, owing to lower fraud risk. That card-present rate has been dropped another 15 to 25 basis points however, meaning that Apple should get a roughly 10 percent discount on processing rates.
Apple is reported to have been "adamant" about getting card-present rates, to the extent of saying it would assume some of the fraud risk by way of Touch ID fingerprint recognition and location data shared via NFC. Banks, in turn, are believed to have conceded on the discount in order to shift that liability, and to make sure Apple's platform accepts all cards.
Reports from August suggested that people will be able to use an iPhone in place of credit cards from American Express, Visa, and Mastercard. The technology should premiere at Apple's press event on September 9.