APEX Europe: Apple Pay’s Business Model a Tough Sell in Europe (May 21, 2015)
Apple may have a hard time exporting its Apple Pay business model to Europe, where interchange revenue is much lower than in the U.S.—and about to get lower. During a panel on prepaid and mobile at APEX Europe in Marbella, Spain, this week, experts suggested that European banks may not greet the tech giant with open arms, unless it’s willing to alter its business model.
U.S. banks reportedly agreed to pay Apple a fee of 0.15 percent, or 15 cents on a $100 transaction, to participate in Apple Pay, a toll they tolerated in exchange for the access and security it promised, observers suggest, according to an article in the spring issue of Pay Magazine (out this month). When new interchange caps go into effect in Europe in December, interchange will be 30 basis points on credit and 20 basis points on debit.
Will Apple change its model? “I don’t think [Apple] knows the answer,” Alex Reddish, relationship manager, Raphaels Bank. “I do think they have a genuine problem,” he added. But, Reddish believes larger issuers will face consumer pressure to adopt Apple Pay to be seen as leading the market. Midsize issuers, however, may be less inclined to participate, he continued.
Monetization has been an ongoing challenge for mobile wallets generally, noted Cheryl Slipski, executive vice president and chief counsel, at Ubiquity Global Services. Wallets struggle with how to extract a revenue model and a lot of it has to do with logistics, she said. Disputes and chargebacks in wallets can be difficult to untangle and can cannibalize revenue, according to Slipski.
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