It has been confirmed that Apple Pay has managed to do something that most merchants have been unable to persuade the networks to do – allow them to pay card present rates (aka cardholder present) on transactions done in store using mobile phones. Cardholder present rates can save merchants as much as 1.25 percent on each transaction. Card not present rates can be 2.75 percent or more, Apple Pay’s cardholder present rates are said to be 1.5 percent.
The rationale for this steep reduction in transaction fees is Apple’s embrace of NFC and tokenization, combined with biometrics. These three things in combination are said to provide certainty to a merchant that the person in front of a point of sale terminal is, in fact the same person whose card credentials are being presented.
This rate is also being extended to transactions via the Apple Smartwatch, when available in 2015, even though it lacks a TouchID capability. The same biosensor that emits a vibration when a message or other notification apparently comes in on the watch also comes into play for payments.
According to Cult of Mac, the watch’s biosensor is sensitive enough to determine when the watch is on or off, and when off, is not able to initiate a transaction at the point of sale. This is because a code must be entered each time that the watch is put on the wrist of an Apple Watch owner. When the watch is removed, the watch is said to lock itself and can only be reopened if the code is reentered.
Reports suggest that Visa and MasterCard may consider extending these rates to other mobile wallet providers, as long as they have biometrics incorporated into their services.