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Chinese Banks Close Lower Fee Deal With Apple Pay

by on February 24, 2016

In an effort to build market share in China’s competitive mobile payments market, Apple has decided that Chinese banks are only to pay half the fees that are currently levied by Apple on US banks. The fees are paid for the privilege of leveraging Apple Pay.

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According to a report on the Chinese website Caixin, Apple made a lower fee deal with Chinese banks. The deal includes Chinese banks having to pay Apple just 0.07 % per transaction, compared to 0.15 % per credit card transaction that Apple is charging in the US. Yes, you read that right, Chinese banks will only have to pay less than half of the amount that US banks are paying.

Why would Apple do this? Well, Apple Pay’s high fees have been a stumbling block for it to enter new markets, including China. Apple has been negotiating with major banks in China since 2014, who simply refused to get on board due to the steep charges. So Apple and the Chinese banks came up with a compromise agreement, in which Apple offers Chinese banks lowered fees. The deal includes 19 launch banks as of right now. These Chinese banks will see a two-year delay on payouts to Apple.

Apple introduced Apple Pay together with China Unionpay. China Unionpay is an interbank network that manages China’s national ATM’s. People who own China Unionpay credit cards will be able to easily add their credit cards to Apple Pay on their iPhones, Apple Watches, and iPads, allowing them to shop safely.

Even though Apple Pay had to take on local tech giants such as Tencent, Alibaba and its biggest competitor Alipay, the payment app has made a great start in China. About 10 million Chinese users signed up in the first hour. In total, no less than 40 million Chinese users signed up on day one. Apple Pay has been a success in the US as well, scoring Apple 15 million dollars in revenue in just the first year. In five years, the figure is estimated to rise to one billion dollars, advertisement revenue included.

Apple Pay has also made efforts to enter the Canadian and Australian markets. These efforts have stalled for the same reasons as it did in China, namely, the fees being too steep. It is still unsure whether Apple will close similar compromise deals with these countries in the future.

Sources: 9To5Mac / Finextra

Header image courtesy of Technojini

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