I have retail clients and I do know how much they pay in merchant fees.
Phone pay is more expensive to the merchant than swiping or tapping a physical card.
Diane
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I didn’t realise Apple Pay cost the merchant more in the US. In the UK (and Europe), total interchange fees are capped at 0.2% for debit cards and 0.3% for credit cards. This is the same whether it’s a physical card or phone. The caps came in precisely for consumer (and merchant) protection since the card networks are essentially a duopoly.
Not sure what this refers to, using Apple Pay is the same as tapping your card here – no extra benefits other than the (very significant!) convenience.
Yep, consumer protection looks very different between the US and EU — fees are capped by law in the EU whereas in the States by law CC issuers carry substantially more liability. But aside from all that, there’s a very important distinction here. Daily Cash is an Apple Card “perk”. When you use the digital version of the Apple Card (i.e. through Wallet) you get 2% vs. the usual 1% you get when using the physical card. But that’s Apple Card. Not just any CC. OTOH with Apple Pay you can use any debit or credit card through Wallet (assuming there’s support for that type of card [network, bank, etc.] in Wallet) and then use NFC (i.e. tapping iPhone against card reader), but in terms of cost to the merchant that should be the same thing as physically tapping an NFC-enabled card against the reader. No difference there from what I have been able to research. Apple Card OTOH does not support this — you cannot just tap an Apple Card (no NFC) against a reader, you have to use Wallet for that. And when you do, the merchant is charged more than if you had used a physical card. Apple Pay is not the same thing as NFC (or rather: contactless payment). A merchant can support contactless but not Apple Pay (which is what I believe @dianed143 was pointing out above). Or they can choose to do Apple Pay (along with perhaps other systems like Google Pay or Samsung Pay) on top of just vanilla NFC/contactless. Hence the dedicated Apple Pay stickers at some shops (vanilla NFC is the sticker with the four wavy lines you also see on your NFC-enabled card or here). None if this is simple, let alone transparent to consumers. And to make matters worse, different features/functionality are not available in all countries. To my knowledge Apple Card has not made it abroad yet.
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Ah, I understand now. Yes, I was talking about Apple Pay specifically, not Apple Card (which as you say, we don’t have) as that seemed to be what @dianed143 said was blocked (which you also noted).
In the UK if a payment terminal doesn’t support Apple Pay, you can still tap your phone but it is subject to the standard contactless card limits (max £100 single transaction, asks for PIN transaction after several contactless ones). It’s been years since I’ve come across one of those, though. With Apple Pay support, there’s no limit since you’ve authenticated with your thumb or face (in place of a PIN for a non-contactless card transaction).
I wonder if the retailers @dianed143 mentioned really are blocking phone contactless, or if their terminals would see them as a contactless card transaction. The staff may have been told to tell people they can’t pay with their phone, but who knows what would happen if someone tried before they were told not to?
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It doesn’t work at all. Terminals have to have those options turned on. Trust me I’m always standing there with the phone ready and nothing happens.
I would guess one could turn on Apple Pay and/or Google Pay separately from each other.
Walmart, as noted, had their own pay and waving my Apple Wallet (via the phone) over their terminal doesn’t work, because it’s not their app.
One of my clients who does a lot of credit card sales opted not to turn on any phone pay because they cost more than regular chip or swipe cards.
I don’t know where tapping a physical card fits into the fee structure.
Punching in a card number manually costs the merchant the most, and every question the terminal asks that is not answered costs as well (street number, zip etc). You can certainly skip them but it’s at a cost.
Diane
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I have wondered the exact same thing.
In fact, I’ve also wondered the same about the Apple Card itself. For example, when traveling in Japan the very friendly and certainly competent customer rep at JR West told me they could not accept Apple Card. At first I thought, fine, I’ll just give him the physical card. But he refused that too saying they could not “process Apple”. I’m still puzzled by that. In terms of credit card and network, Apple Card is nothing but a Mastercard network CC issued by GS. I wonder if they truly cannot validate against the chip or striwe of that card for whatever reason (the AC does not show the CC number and exp date on its face unlike virtually ever other CC so the card cannot be eg. scanned) or if they have just instructed their employees to refuse for other reasons (cost?). Obviously, I could not just reach over and try it myself, but I’d really like to know what’s actually going on there. And if it’s truly a technical issue or if it’s more related to merchant charges. I’m genuinely curious.
I believe that tap-to-pay is more expensive for retailers than mag-stripe swipes or chip card insertions because many small businesses in my city either do not accept tap-to-pay and digital wallet payments or add a service fee to all types of contactless payments.
It could be an issue related to authorizing non-USA transactions on a USA-issued credit card. Many USA cards are not fully compliant with the chip-and-PIN protocols used outside of the USA. Also, many US-based issuers don’t support or have problems using the card associations’ real time 2-factor authentication for “suspicious” or “out of pattern” transactions.
Wow! It’s illegal in CT to add services charges to any credit card transaction, although we can offer a cash discount.
I hate inserting a chipped card, it is the slowest method of all.
Diane
Those are certainly good points, but the same customer rep had no problem when I tried another US issued Mastercard network CC. In fact, I used two different such Mastercard CCs with JR West (and JR Central I believe) and they both worked just fine with them. All of that was very old school with just a signature, no chip or PIN, nothing. AFAICT they just swiped the card, so just old-school magnetic stripe.
It’s as if they knew there was some issue specific to Apple Card.
Don’t forget (or if you’re not a retail operations geek, an important distinction) is that a credit card network is different from a credit card issuer. So, what happened at JR is not uncommon.
Interesting. I don’t find tapping a chip card to be any faster than inserting it. The electronic handshake process is the same with both; the only processing difference is the actual method of communication between chip and reader. When you tap your card, it makes a wireless connection via NFC to exchange data, whereas when you insert your chip card into the reader, there are physical contacts inside the reader that mate to the visible chip panel on your card. In theory, the physical contacts ought to be slightly faster, but in practice the difference will be negligible.
I find using Apple Pay to be faster than using the physical card. Not because the actual communication takes place any faster, but because my phone is always readily accessible in my pocket or purse, whereas my card is in my wallet inside my purse, so it takes more time to get it out and put it away.
And I won’t use a magnetic swiper unless I have to. Swipe skimmers are everywhere these days—not that every swiper is likely to have one, but you don’t know and usually can’t tell when one has been put there. The skimmer technology has gotten small enough that they can be virtually undetectable to anyone but an expert.
But it’s all better and faster than the old imprint machines that are thankfully almost completely obsolete. The process took forever, especially if the cashier was not particularly experienced in their use, and there was less than zero security, with your card data plainly imprinted on paper. I look back at those days and am amazed sometimes that credit card fraud wasn’t more common than it was back then.
Are you in the US? I’ve been told that overseas (i.e. not in the US), the chip readers are much quicker. I’ve had the chips fail more than the stripe too.
I was thrilled when I realized some of my cards could be tapped because it worked so much better!
Apple Pay is definitely the fastest method for me.
Diane
We’ve gotten far off the original topic, but I’m going to contribute to the tangent:
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If you think using Apple Pay via a phone is quick, try an Apple Watch. You don’t even have the friction of pulling your phone out of your pocket. The only difficulty can be positioning your wrist over the reader.
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Many small businesses in the USA use Square as their payment processor and use terminals that can process all common card formats. Square’s fees to merchants with under $250k annual sales are shown here.
Note that the only markup is for transactions that are manually entered and cannot be immediately validated. There is no difference based on card type or issuer
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About 6 years ago I visited London for the first time. I was in a park and bought a drink at a kiosk by handing over my physical card (in the US, at the time, tap to pay was rare). I used a card that has no foreign transaction fees. It literally took like 2 minutes for the transaction to go through. I actually had to apologize to people waiting behind me (there was a queue of several people). I remember wondering if the service had to telephone a bank in NYC for approval or something. Later I used my phone to pay via the same card and it was almost instantaneous, so I started using that everywhere I could.
On my most recent trip last spring, I never took any physical cards out of my wallet. I used my watch to pay everywhere (including the Underground) and it was so amazing and convenient. Most transactions were handled in 2-3 seconds total. Just beep and go.
I wish contactless were as common here in the US, but the ability varies wildly, so it’s easy to forget you can do it. And most cashiers are young and clueless and just shrug when you ask if they support certain payment methods. Most just say, “Try it” and so you’ll waste time fiddling (and sometimes the cashier has to hit a button on their end to turn on the contactless option).
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I’d say one factor is that simply posessing a credit card number–or a Social Security number, even–up until the late 1990s wasn’t that useful because the ways in which such information could be used was extremely limited. In, say, 1988, applying for a mortgage or car loan required filling out paper forms and, usually, a visit to a bank branch. And using a stolen card to buy stuff by calling the 800-number for the Sears catalog or watching Home Shopping Network didn’t scale too well…plus there wasn’t eBay or Craigslist for fencing the merchandise.
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The protocols for the physical chip reader (EMV) were actually developed in the 1970’s, though not deployed until the 1980’s in Europe and much later in North America. The silicon we had to work with was quite limited and the protocols involved slow, overspecified data exchange and very long timeouts.
I don’t know much about NFC, except that the protocols are much, much newer.
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My understanding is the technology currently used in the US for chip cards is not those old 1970s protocols, but instead uses more modern implementations. Yes, the basic asymmetric encryption technology dates back to the '70s, but those original standards are quite primitive compared to what’s been available in the last couple of decades. Using them in cards that have been available in the US for maybe a decade now would be like trying to carry 4K video traffic over the original cellular network: an exercise in futility.
I can believe that those old protocols may still be in use in many places in Europe, though. Europe has been using chip cards continuously for a much longer period than the US. They’re still relatively new here, and the readers are all of fairly recent manufacture.
Sorry for the odd ordering of posts after I merged the previous posts into this new thread. Discourse has an option for preserving chronology, but in my experience, it causes confusion if the new topic is newer than the oldest post in the previous topic.
Good discussion though, and it wasn’t immediately clear that it should be broken off because the basic thrust was “ways that digital wallets will replace physical ones.” But once that became the dominant subject, I agreed with those who suggested a breakout.
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Bank of America used to issue an American Express card.