Apple Pay wants a slice of India, but faces a big pricing challenge

Apple Pay is facing pricing challenges as it prepares to launch its payment products in India, where transaction costs are either minimal or zero, according to people familiar with the matter.

US-headquartered technology firm Apple has been in discussions with some of the country’s largest banks to launch its mobile payment services, which rank among the world’s most widely used digital payment methods, said two bankers with knowledge of the matter.

Globally, Apple Pay charges 0.15- 0.20% (15-20 basis points) of transaction value as settlement fees. In India, however, credit card transactions operate at around 5 basis points, while Unified Payments Interface (UPI) transactions are processed at zero cost. A basis point is a hundredth of a percentage point.

With UPI clocking nearly 20 billion transactions a month, the opportunity to scale up is significant, but the pricing structure presents a key entry barrier for global players in one of the world’s most competitive digital payments markets.

With India’s digital payments market operating on a very narrow pricing margin, Apple Pay’s biggest challenge would be to negotiate at low rates with banks, according to the bankers. “In India, payment firms operate on a blended rate for credit card payments at around 5 basis points, much lower than international standards,” said one of the bankers, who did not wish to be identified. “For Apple Pay, the standard pricing hovers around 15-20 basis points. It will have to climb down significantly to cater to Indian price points.”

Queries emailed to Apple went unanswered.