The news: After banks reportedly pressured Visa to revise how it processes Apple Pay transactions, the card network is rumored to be considering a plan that would reduce the fees the wallet earns on subscription payments, per The Wall Street Journal. The proposed change would take effect next year, people familiar with the matter told the Journal.
Key context: When Apple Pay debuted, issuers and card networks feared Apple would extend its reach and brand loyalty too far into payments and eat into their market share. So Visa forged an agreement with the tech giant: Apple could decide which issuers and cards it would accept, and in exchange, Apple would not launch a competing card network.
Apple has kept its side of a bargain, but the 2019 launch of Apple Card and its subsequent popularity—placing Apple into more direct competition with issuers—might be a factor driving the fee reevaluation.
Why this matters: For now, the proposed change would only affect subscription payments, a small portion of overall payments but still a sizable market: Last year, revenues in major subscription categories reached $54 billion in the US, per Insider Intelligence pre-pandemic estimates.
But there are two potential implications:
The bigger picture: Apple is facing other payments challenges. EU regulators are reportedly preparing to charge Apple for antitrust practices concerning the NFC technology—which underpins contactless payments—on its iPhones, per Reuters.
Related content: To read more on Apple Pay’s challenges and other factors affecting its business, check out the Proximity Mobile Wallets portion of the “US Mobile Payments Forecast 2021” report.