Dropping this Oct: Apple Pay services set for India launch, no UPI yet

Apple Pay is set to launch in India by October, initially supporting Visa and Mastercard credit cards but not UPI, as Apple negotiates transaction fees with banks

Apple Pay, the iPhone maker’s digital payments service, is set to launch in India by October, giving the company a foothold in the country’s premium credit card segment and earning the tech giant a fee on each transaction, three people in the know told Business Standard.

 

To begin with, Apple Pay will support credit cards on global networks such as Visa and Mastercard, using the same framework that it runs in other global markets. 

Apple Pay will not support transactions through Unified Payments Interface (UPI) at launch. To offer UPI, Apple would need clearance from the National Payments Corporation of India (NPCI) and would be required to partner with a sponsor bank for routing such transactions. 

For months, Apple has been negotiating with the country’s largest credit card issuers over how much of each transaction it gets to keep, said sources in the know. The fee would not be charged to the customer or the merchant. Instead, it would be paid by the bank from its own earnings on card payments called interchange. 

An email sent by Business Standard to Apple on the matter did not elicit a response till press time. 

“Apple has been readying the launch by the end of September or October,” a source said. 

With Apple Pay, users can save their cards to the Apple Wallet. To transact at a store, they can tap their device on point of sale (PoS) terminals to make contactless payments via near field communication or NFC. 

A source familiar with the structure Apple had been in negotiations with banks over how much of each card payment the tech giant would get to keep when a customer pays by tapping an iPhone at a PoS. Apple had been negotiating for a 15-20 basis points (bps) share of interchange fee on each credit card transaction, while some major credit card issuers were pushing for 10 bps, the person said. 

One basis point equals 0.01 per cent. An interchange is a fee paid by the merchant’s bank to the card-issuing bank for processing a card payment. 

It is part of the merchant discount rate (MDR) — the fee paid by the merchant for accepting digital payments.

 

“Cardholders will store their credentials to an Apple device and use their phones (or tablets) to make payments. So, Apple was asking 15-20 bps as its charge per transaction. Bigger banks negotiated saying they can offer a 10 bps fee,” said one of the sources familiar with the development. 

Apple Pay’s launch in India, expected this year, is likely to result in an increased uptake of credit card transactions in India, according to payments companies. 

“We do believe Apple Pay will enter the market before the end of this year… More and more payment transactions will go back to credit card as credit card plus UPI continues to grow in the market, credit card transactions will be back in the field. We are already getting to see an almost 10-15 per cent growth in credit card payment transactions in the market,” said Amrish Rau, chief executive officer (CEO), Pine Labs, during the company’s Q1 earnings call.

 

Apple Pay is already present in more than 90 markets across the world. The payments service’s entry into India comes at a time when Apple has recorded a double-digit growth in the Indian market alongside Latin America and South East Asia.

The playbook

• Apple Pay is unlikely to support UPI transactions, since that would require NPCI’s nod and a sponsor bank
• Apple, top credit card issuers in talks over share of interchange fee
• iPhone users can save card details to Apple Wallet, make online or contactless payments at point of sale machines 
• Credit card uptake could rise with Apple Pay’s entry, say payments firms