Synopsis
Apple Pay faces pricing challenges as it looks to launch in India, where transaction costs are very low or zero. The company is in talks with major banks but may struggle to match local rates, making price negotiations a key hurdle in entering one of the world’s largest digital payments markets.US-headquartered technology firm Apple has been in discussions with some of the country’s largest banks to launch its mobile payment services, which rank among the world’s most widely used digital payment methods, said two bankers with knowledge of the matter.
Globally, Apple Pay charges 0.15- 0.20% (15-20 basis points) of transaction value as settlement fees. In India, however, credit card transactions operate at around 5 basis points, while Unified Payments Interface (UPI) transactions are processed at zero cost. A basis point is a hundredth of a percentage point.
With UPI clocking nearly 20 billion transactions a month, the opportunity to scale up is significant, but the pricing structure presents a key entry barrier for global players in one of the world’s most competitive digital payments markets.
With India’s digital payments market operating on a very narrow pricing margin, Apple Pay’s biggest challenge would be to negotiate at low rates with banks, according to the bankers. “In India, payment firms operate on a blended rate for credit card payments at around 5 basis points, much lower than international standards,” said one of the bankers, who did not wish to be identified. “For Apple Pay, the standard pricing hovers around 15-20 basis points. It will have to climb down significantly to cater to Indian price points.”
Queries emailed to Apple went unanswered.
The founder of a fintech platform, which processes credit card payments and UPI transactions, said banks negotiate at very low rates in India, given the play in the local market is around volume. On February 26, Bloomberg reported that Apple was in talks with ICICI Bank, HDFC Bank and Axis Bank to take its payment service live in India.
Apple is set to launch both card payments and UPI payments in India. “While talks are on, price negotiations are emerging as potential bottlenecks,” said the second banker, adding that Apple might take its payment service live in India with a smaller bank, with which price negotiations could be easier.
Apple Pay is one of the largest payment methods globally, after US-based payment networks Visa and Mastercard. Industry estimates suggest that around 500 million users across the world could be using Apple Pay, corresponding to roughly 50% of Apple users worldwide.
