US banks are paying a high price for the privilege of placing their cards on Apple Pay, with the tech giant demanding not just cash but also detailed reports and analytics on card usage data, according to a leaked draft of the 19-page commercial agreement with issuers.
According to the term sheet, which was picked up by Sanjay Sakhrani, an equity analyst at Keefe, Bruyette & Woods, Apple will receive 15 basis points (0.15 percent) per credit card transaction, as well as a half a penny for each debit transaction. The contract also stipulates that issuers must make available at least 95% of the cards in their portfolio to iPhone users.
While the financial terms were widely suspected, Sakhrani was surprised to find that the fees paid to Apple would be collected by the major card schemes Visa and MasterCard, with Apple maintaining the right to audit the issuer's Apple Pay records at least twice a year.
Apple is also demanding a large number of data points from banks on card usage, including purchase volume, in-store vs. in-app purchase mix, the top 100 merchants by purchase volume, and the average purchase amount.
The fees paid to Apple, while significant, pale next to the charges levied by Visa and MasterCard for issuing tokens in place of card numbers, with MasterCard charging 50 cents for each token provisioned through the network.