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News about Apple's rumored mobile payment initiative have been scarce over the last couple of months, but details are finally starting to emerge ahead of the company's September 9 media event. And they're worth paying attention to. According to Bank Innovation, Apple has secured lower credit card transaction fees for the service with heavyweights like Citigroup, JP Morgan Chase, Capital One, and Bank of America.
Under the agreement, all transactions completed with Apple's service will show as "card present." Fees are usually higher when you pay for goods without a credit card in hand owing to the higher risk of fraud, but Apple was apparently able to convince the companies of the safety of its service in order to obtain the better rates. (One has to wonder how the recent uproar over celebrities' nude photos obtained through iCloud affects this.) So far, we know that the service probably works in tandem with an NFC chip that records location data, and Touch ID, which stores its data locally on the phone itself.
This is a major step forward for mobile payments. It means that the service will be more secure than initially thought, for one, plus it also means that transactions won't be so costly for the companies selling the goods and the credit card companies themselves. In theory, it makes such a newfangled concept no more intrusive than swiping a credit card.
"Apple has also managed to bump down the actual 'card present' rate by 15 to 25 basis points, according to people with knowledge of the talks," the article says. " Normal 'card present' discount rates, which are shared by issuers and networks but determined by the network, are about 1.5%, which means that Apple appears as though it will get around a 10% discount on the processing rate it will pay. Last quarter, Apple generated $4.5 billion of iTunes revenue — this implies that Apple will save at least $27 million as a result of these deals with the banks. Of course, more revenue volume is expected upon launch of Apple's payments venture."
In addition to the banks above, Apple is also thought to have secured agreements with credit card companies Visa, MasterCard, and American Express, and the article goes on to say that the company is also working with independent retailers. Apple is expected to announce the initiative at the event on September 9.
Follow this article's writer, Leif Johnson, on Twitter.