Mobile Commerce

Can Apple Pay Make Its Financial Mark In Canada?

Apple Pay hasn't even made its way to Canada yet and it's already gaining some negative press.

This time, however, it's not about consumer adoption projection rates. Instead, a report from investment bank Cormark Securities suggests that Apple Pay won't play a role in giving Canadian banks a revenue boost, Bloomberg reported.

In fact, Meny Grauman, an analyst with Cormark, said Apple Pay will likely only have an "immaterial" impact on earnings.

Grauman addressed investors in a note late last week (July 9). The note addressed the annual per-share earnings impact on the major banks that have said they'll support Apple Pay. According to the note, the banks — which include Royal Bank of Canada, Toronto-Dominion Bank and four other large lenders — might actually take a hit and fall 5 basis points because of Apple's transaction fees.

The six lenders would would see a profit trim of .23 percent, Grauman suggested, as most estimates peg Apple's portion of interchange fees to come in at 15 basis points.

“Even at a 25 percent adoption rate, which is a very tall order, the EPS impact on the large Canadian banks would still be immaterial to overall earnings,” Grauman told Bloomberg.

Apple Pay is set to launch in the U.K. tomorrow (July 14). A specific date has not been released for the Canada Apple Pay launch, but most reports indicate it will be in November. There have been some reports of delays in Canada due to debates over the interchange fees.

While Canadian banks appear to be behind the concept of Apple Pay, the crutch of the negotiations seems to go back to the proposed fees for the service, according to people said to be close to the matter. This issue is also what may be holding back Apple Pay’s entrance into China, as Apple’s negotiations with the Union Pay and the Chinese banks have stalled.

As for how Apple Pay is doing in the U.S., Grauman cited data from ITG Market Research that suggested that Apple Pay has only captured 1 percent of mobile payments that have been processed in the U.S. That figure, however, is anticipated to jump to 15 percent in the next four years.

While the mobile payments buzz continues to dominate talks with Canadian banks, another report details how the banks have been overwhelmed by the ever-changing mobile payments market.

Fast-paced innovation on the mobile payments front is causing banks to take one step forward and then two steps back. For example, two of Canada’s Big Six banks were ready to strike a deal with digital payment solutions provider Proxama until they saw that smartphone apps had released new features.

“Things are changing so quickly, and that’s what’s delaying us,” says Ricky Ranjan, a vice-president of sales in North America for Proxama, to The Financial Post. “Every time we sit down, a new payment initiative is popping up. You just have to go back to the drawing board and say, ‘OK, how do we support this?’”

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