Apple Pay launch in October: Cards at launch, but UPI could be big question

Apple Pay could launch in India as early as October with credit card support, entering a market dominated by UPI. Here is an explainer on what is Apple Pay and how it could work

For years, iPhone users in India have had to rely on third-party payments apps such as PhonePe, Google Pay and Paytm for digital payments. That could change soon, with Apple preparing to bring Apple Pay to India as early as October, giving users a way to make payments directly through Apple Wallet and supported devices. The reported initial rollout will focus on credit cards, with Axis Bank expected to be among the first banking partners.

 

Apple Pay, however, is entering a market unlike most countries where it already operates. India has built a vast digital payments ecosystem around the Unified Payments Interface (UPI), which accounted for about 84 per cent of digital payment transaction volume, according to the Press Information Bureau (PIB). The timing is also significant, with a new 0.4 per cent merchant discount rate (MDR) for certain UPI merchant transactions set to take effect from October 15.

 

What is Apple Pay

Apple Pay is Apple's digital wallet and payment service. It allows users to add an eligible credit or debit card to the Wallet app on an iPhone, Apple Watch and other supported Apple devices, and then use the device to make payments at contactless terminals, as well as on websites and in apps.

 

For an in-store payment, an iPhone user can double-click the side button, authenticate using Face ID or a passcode, and hold the phone near a contactless payment terminal. Apple Pay uses Near Field Communication (NFC) to communicate with the terminal. Apple Watch users can also make payments using the service.

 

Instead of sending the actual card number to the merchant, Apple Pay uses a device-specific number and a transaction-specific security code. Apple says the original card number is not stored on its servers or shared with merchants.

How will Apple Pay work in India

Reuters recently reported that the India rollout is expected to begin with Axis Bank credit cards. Apple is also in discussions with HDFC Bank and ICICI Bank, although commercial terms with those banks had not been finalised at the time of the report.

 

According to the report, Apple Pay is expected to initially support credit cards on global networks such as Visa and Mastercard. Users would be able to save their card details in Apple Wallet and make contactless payments by tapping their iPhone or Apple Watch at NFC-enabled point-of-sale terminals.

 

This means the initial rollout is expected to focus on card payments rather than trying to replace India's broader digital payments system.

How is Apple Pay different from PhonePe and Google Pay

The major difference is the payment system behind them.

 

PhonePe and Google Pay are major UPI-based payment apps in India. UPI allows users to transfer money directly between bank accounts and make payments using methods such as QR codes and UPI-enabled applications. Reuters says PhonePe and Google Pay together account for about 80 per cent of UPI payment value.

 

Apple Pay, in its reported initial India configuration, is different because it is built around cards stored in Apple Wallet. Instead of opening a payment app and scanning a QR code, users can authenticate on their Apple device and tap it against a contactless terminal.

 

Simply put, PhonePe and Google Pay primarily connect users to India's UPI payment rail, while Apple Pay's reported initial India rollout would connect a user's card to Apple devices and card networks.

What India-specific features are known so far

The most significant India-specific detail is the expected banking arrangement. As stated above, Apple is expected to kick off Pay with Axis Bank credit cards and may add more banks over time. HDFC Bank and ICICI Bank are among the lenders with which Apple has held discussions.

 

As reported previously, Apple had been negotiating with major credit card issuers over the share of interchange fees it would receive from transactions. According to the report, Apple takes 15-20 basis points of interchange fee on every Rs 10,000 purchase. A basis point is one-hundredth of a percentage point.

 

The fee would not be charged separately to the customer or merchant. Instead, it would come from the bank's earnings from card transactions.

Will Apple Pay support UPI

Apple Pay is not expected to support UPI when it launches in India. Business Standard reported in August that the service would initially support credit cards on global networks such as Visa and Mastercard. For Apple Pay to offer UPI transactions, Apple would need clearance from the National Payments Corporation of India (NPCI) and a sponsor bank to route the payments.

 

A more recent report citing Bloomberg said Apple Pay could eventually support UPI alongside card payments, but Apple and NPCI have not confirmed such integration or its timing.

 

For now, Apple Pay's expected India launch should therefore be viewed primarily as a card-based contactless payment service, with UPI integration remaining a possible later addition.

 

In Business Standard report, Pine Labs chief executive officer Amrish Rau had said that Apple Pay's entry could support growth in credit card transactions in India. During the company's Q1 earnings call, Rau said credit card transactions were already growing by around 10-15 per cent as credit cards and UPI continue to grow alongside each other. 

What changes with the new UPI MDR

Apple Pay's arrival also comes just before a major change in India's UPI pricing structure.

 

From October 15, a 0.4 per cent MDR will apply to UPI merchant transactions above Rs 2,000. The fee will not apply to person-to-person transfers, while exemptions will cover small merchants and some essential sectors.

 

This marks a change from UPI's long-standing zero-MDR model for merchants. The new fee is relevant to Apple Pay's India launch because it changes the economics around digital payments.

 

However, the MDR applies to selected merchant transactions and is not a fee that consumers will pay every time they use UPI. Reuters reported that banks and payment providers are not allowed to pass the fee directly to consumers.

 

That means the new UPI MDR does not automatically make Apple Pay cheaper for consumers. Apple Pay's initial proposition remains centred on using eligible credit cards through Apple devices, while UPI continues to operate as a bank-account-based payment system. 

What does the launch mean for India's payments market

Apple Pay is entering a market that already has a mature digital payments infrastructure. UPI processed 24.51 billion transactions in August, and NPCI has also recently introduced a UPI tap-and-pay feature using NFC. The feature allows users to make contactless UPI payments by tapping their smartphones on compatible point-of-sale terminals without opening a UPI app.

 

This means Apple's arrival will not introduce contactless payments to India by itself. Instead, it will add Apple's hardware and card-based payment system to an ecosystem where UPI is already dominant.

 

For Apple, the India launch also provides access to a growing credit card and premium smartphone user base. According to Counterpoint, Apple has captured around 8 per cent of India's smartphone market since 2022, while Reserve Bank of India (RBI) data shows Axis Bank had about 16.26 million active credit cards as of July.

 

Apple Pay will enter India with a card-based payment model in a market where UPI is already widely used. Its adoption will depend on how easily it fits into existing payment habits and whether Apple adds UPI support in the future.