Apple Pay Fees for Merchants: What Small Businesses Need to Know

Apple Pay Fees for Merchants: What Small Businesses Need to Know

When you’re a small business owner, every customer counts. So, it’s important to offer the right payment options to make your customers’ checkout experiences as seamless as possible. 

A whopping 69.8% of online shopping carts are abandoned. But being an SMB owner doesn’t mean you have to settle for cart abandonment as a cost of doing business.

Letting customers pay with their iPhones can expedite the checkout process. Research Dive reports that the global mobile wallet market is likely to have a revenue of $46 billion by 2028, with a CAGR of 18.9% between 2020 to 2028. 

Apple Pay Fees_Mobile Wallet Market Size_Infographic

Since Apple Pay is one of the most widely used mobile wallets in the payments industry, let’s take a look at what the Apple Pay fees for merchants are. We’ll also review how Apple Pay works and what sort of costs you may incur if you accept Apple payments.

What Is Apple Pay?

Apple Pay is an alternative payment method that keeps customer information safe. It’s a form of NFC contactless payment that avoids the use of credit cards and debit cards. 

NFC payments, or near-field communication payments, utilize NFC technology which facilitates the communication between two electronic devices held close together. It can help retailers save time and clear up congestion at the checkout line while increasing payment security.

Keep in mind that Apple Pay still uses a linked credit or debit card. Customers will still need their Visa, Mastercard, American Express, prepaid card, etc. to set up their Apple Pay account. They will only need to load their card information or bank account number to their Apple Pay account once. From there, their card data will be saved for future use.

Apple Pay has a wider adoption among younger consumers, such as millennials and Gen Z. With Apple Pay, customers can sign in with a quick facial scan and touch ID. This is a lot faster and more polished than rifling through their bag for their credit card. So, it makes sense that digital wallets like Apple Pay and Samsung Pay have experienced monumental growth in recent years.

The Apple Card

With the increasing popularity of Apple Pay, Apple has come up with a bevy of corresponding offerings to further facilitate customers’ payment processes. Remember how the retail industry came full circle with Amazon now opening physical stores? Similarly, the cardless payments solution recently came out with a credit card.  

Apple recently released the highly controversial Apple Card as an extension of Apple Pay. It works with the Apple Wallet app and creates a seamless experience when Apple customers need to process a card transaction at a retailer’s POS station. Additional Apple devices, such as the Apple Watch, are also Apple Pay-enabled for mobile payments at an in-store point of sale. 

As a note, the Apple Card is a credit card. There is, however, the Apple Cash Card, as well, which is essentially a debit card that allows people to store and exchange digital cash.

How Does Apple Pay Work for Customers?

Apple Pay reduces credit card swipe fees for merchants by using near-field communication technology. All customers have to do is open the app on their phone and they can set up two-factor authentication. 

Once they’ve entered their one-time-use passcode, they can use Face ID and their iPhone’s side button to pay, pressing it near the payment terminal. They won’t even need their card number.

How Does Apple Pay Work for Merchants?

It is nearly as easy to set up Apple Pay for merchants as it is for customers. Merchants need two things to begin taking Apple Pay: a payment terminal enabled with NFC capabilities and a payment processor that works with Apple Pay.

Most EMV payment terminals from 2016 or earlier come equipped with NFC capabilities. So, it’s easy for any merchant with an updated computer or compatible iOS mobile device to add Apple Pay to their repertoire.

The Drawbacks to Apple Pay

Here’s an interesting caveat to the Apply Pay-affordability equation. While merchants are happy with the processing fees they pay with Apple Pay, most major banks don’t share that sentiment. 

Major banks such as Bank of America, JP Morgan Chase, and Capital One are unhappy with their cut from Apple. So much so that they’ve formally requested that Visa, “change the way that it processes certain Apple Pay transactions.” In other words, pay Apple less in transaction fees.

Apple Pay works for online payments as well as in-person purchases. Online customers will just choose “Apple Pay” at checkout to enter their payment information from their computers. 

Unfortunately, customers cannot use Apple Pay with Android phones. They can, however, use Google Pay with Android phones. However, Apple Pay transactions work with iPhones as far back as the iPhone 5, iPhone 6, iPads, etc.

What Are the Apple Pay Fees for Merchants?

Apple Pay fees are generally lower than traditional credit card processing. Credit card issuers charge small businesses substantially more. As such, many SMBs ask employees to encourage Apple Pay transactions.

Like PayPal and other third-party payment service providers, Apple Pay doesn’t charge for transfers that take a few days. But for instant transactions, customers are charged a 1% fee with a $0.25 minimum and a $10 maximum

Merchants, on the other hand, aren’t charged at all to use Apple Pay on physical and eCommerce transactions.

Apple Pay Fees_Instant Transactions_Infographic

How Does Apple Pay Compare to Credit Card Payments?

Credit cards are still a widely used payment system. Processing credit card transactions, however, means additional fees for merchants. There’s no way for business owners to completely avoid credit card processing charges.

Apple Pay is a lot cheaper for merchants. Although Apple Pay is now accepted at over 85% of retailers in the US, many customers still use cards. 

As such, POS systems should be optimized for credit card transactions, as well as Apple Pay, Google Pay, etc. Merchants can encourage customers to use NFC touchless payments, but ultimately it comes down to the customer’s choice.

Still, Apple Pay is processed faster than traditional credit cards, debit cards, or cash transactions. When it comes to processing times, NFC technology leaves traditional physical card networks in the dust. 

Apple Pay users are also cardholders with traditional credit/debit card networks. But Apple Pay adds customer security and merchant savings to the mix.

Apple Pay Fees_Apple Pay Popularity_Infographic

Is Apple Pay a Viable Option for Small Businesses?

Small businesses can’t afford to launch their own touchless payment system, like Walmart’s new “Walmart Pay.” So SMBs have to get a little more creative to enable touchless payment options. 

Apple Pay doesn’t charge fees for business owners to process transactions and it can expedite checkout lines. It’s an essential payment method for small business owners. However, SMBs should also offer a touchless option for Android users (like Google Pay).

Apple Pay can be used to reduce customer traffic at checkout and to reduce processing costs for small businesses. SMB owners have the advantage of quick implementation and rollout of new payment methods. 

Apple Pay is quickly becoming mainstream. It is used widely across the US, Latin America, Asia Pacific, Australia, Africa, and Canada. View this full list of participating Apple Pay financial institutions around the globe.

Overall, not only is accepting Apple Pay a viable option for small businesses, it’s a really good idea. It can even help you gain a new generation of shoppers, who prefer to use a digital wallet.

The Bottom Line

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At the end of the day, merchants can’t control which payment methods their customers prefer. Apple Pay and other NFC payment platforms can help SMBs save on payment processing. But sometimes customers will still want to use their credit cards.

Payment Depot offers membership-based wholesale pricing for payment processing on card transactions. This can help merchants save more when credit card processing is the only option. With an A+ rating from the Better Business Bureau, Payment Depot helps merchants save an average of $400 a month on card processing. Contact us today to learn how we can help your small business save more on credit card processing fees.

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