How Will Apple Pay Impact Credit Card Processing Services?

Jeff Zimmerman


It's no secret that any time Apple launches a new product, people stand up and take notice. This week's Apple Pay announcement was no different. I'm sure you've already heard many of the details, so in this post my plan is to focus on how Apple Pay will impact credit card processing services.

How does Apple Pay work?

Apple Pay will use Near Field Communication (NFC) to send a payment token to the merchant's point-of-sale system. However, in order for merchants to accept payments via Apple Pay, it means that credit card terminals and POS systems must have a contactless reader in order to accept NFC payments.

Do you have any tips for merchants looking to upgrade their terminal or POS system?

For merchants looking to upgrade their terminal or POS system, now is a good time to look into those devices that also support EMV cards, or smart cards. The leading device manufacturers have several models of NFC terminals to choose from, even though adoption to date has been slow.

Will all payment processing companies support Apple Pay?

Eventually most, if not all, payment processing companies will support Apple Pay. However, it does not mean that they do at this very moment. First, these companies must offer terminals and POS systems that support NFC. Processors also must support the new tokenization standards of the payment networks.

Is there a cost to merchants who wish to accept Apple Pay?

Merchants will not have to pay to accept Apple Pay. The transactions will very closely resemble Visa, MasterCard, and American Express transactions, and as far as the merchant's processing rates, their typical rates will most likely apply, however, the exact details will depend on how the payment processing companies formulate their policies around Apple Pay.

What interchange rates will apply to Apple Pay transactions?

Visa has issued guidance that Apple Pay transactions made via NFC will be treated as card present transactions. This means that their typical interchange rates will apply, which should make merchants happy. Visa also said that in-app purchases via Apple Pay will be treated as e-Commerce transactions.

Is there anything else merchants should be aware of?

While this is definitely major news, adoption and rollout of Apple Pay will take time because for starters, the iPhone 6 is not even available yet. Sure, I bet Apple will sell a ton of phones right out of the gate, but the iPhone 6 will only represent a small portion of the overall smartphone market, at least for the time being.

Then there's the fact that Apple Pay will initially only be available at 220,000 stores. While this might sound like a big number, it's really not when you consider that there are 8 million businesses in the United States that accept payment cards.

What else do merchants need to know?

Don't get too excited just yet, and definitely do not panic. Apple Pay is major news, but it is likely to take some time to have a real impact in the market. First, consumers will need to buy the new iPhone 6 when it comes out. I'm sure Apple will sell millions of new phones, but that will still only represent a small percentage of the overall market.

More details will surely follow in the coming weeks, so we all have a lot to learn about the ins and outs of Apple Pay. So stay tuned. We'll be sure to keep you informed as more information becomes available.