Apple's fee terms keep India's biggest card issuers out of the Apple Pay launch

An Axis Bank customer adds a Visa credit card to the Wallet app and can now pay by tapping an iPhone or an Apple Watch, at a till or online ^[1][2]. At a terminal run by an independent payments provider that has switched Apple Pay on, the tap can go through. At the next shop, whose acquiring bank has not enabled the service, the same card on the same phone can fail, one person familiar with the rollout told TechCrunch ^[19]. The customer then pays the way people in India already pay, by scanning a QR code that draws money straight from a bank account ^[9].

For now the product serves a narrow slice of people: iPhone owners with an Axis Bank Visa or Mastercard credit card, shopping at merchants whose terminals are enabled ^[2][18]. The case put to banks is that this slice matters more than its size. India's iPhone users tend to be more affluent and more likely to carry premium credit cards, TechCrunch reported, and that could make Apple Pay hard for banks to ignore ^[20]. What users actually do is scan QR codes. Every payment method outside UPI, cards included, shares roughly 16 percent of India's digital transaction volume ^[17]. The launch reports include no usage data, so the premium-cardholder argument is still a forecast.

The pitch to a bank is a smoother checkout for its best customers, and what the bank actually does is hand over part of its margin. People familiar with the talks told TechCrunch that Apple wants about 20 basis points on transactions, out of roughly 40 to 50 basis points of margin in the payments layer ^[6][13]. That leaves 20 to 30 basis points for everyone else in the chain ^[16]. The same people said Apple's terms have become a sticking point with some of India's largest banks ^[3]. They also said the fee gives Apple another way to earn money from its growing base of iPhone users in India ^[10]. Apple, Axis Bank, HDFC Bank, ICICI Bank and SBI Card did not respond to TechCrunch's requests for comment ^[12].

For a card issuer, the decision comes down to two measures. One is the share of its credit card spend that comes from premium cardholders carrying iPhones. The other is whether its margin on those cards survives giving Apple 40 to 50 percent of the payments-layer margin on each tap ^[15].

A bank high on the first measure that can absorb the second should sign now, because Axis is currently the only issuer whose cards work with Apple Pay in India ^[2]. A bank high on the first that cannot absorb the fee keeps negotiating, and pays for that by watching some of its best customers add an Axis card to Wallet. A bank low on the first can wait either way; its customers are already paying by QR code. HDFC Bank, ICICI Bank and SBI Card, still in talks, have put themselves in one of the last two boxes ^[4]. In my view the ones with the largest premium iPhone books belong in the first, and the cost of moving there is a thinner margin on every Apple Pay transaction for as long as the terms hold.

For a merchant the test is narrower. Apple Pay belongs on the door sticker only after the acquirer behind every terminal in the shop has confirmed the service is enabled ^[18].