Is Apple A Threat To Small Banks?

The big banks, Citigroup, Bank of America, Wells Fargo, JPMorgan Chase and Capital One Financial, all played a prominent and public role in building Apple’s much lauded mobile payment platform Apple Pay.  Small banks, observably did not and that has ignited concerns that Apple’s entry into payments will come at the expense of smaller players as more consumer spending is driven to the big card brands.

“Apple Inc. has potentially handed a major competitive advantage to the largest U.S. banks at the expense of their smaller counterparts,” Chris Stulpin, an analyst at Merion Capital Group, explained in a research note Tuesday, reports American Banker .

One possible problem for smaller banks is that Apple will simply offer them a less workable set of financial terms than it has negotiated with the larger players.  Banks with less than $10 billion in credit assets will loose an advantage they  have over their larger counterparts that are subject to  a statutory  price cap on debit card swipe fees.

Apple could also steer users toward credit over debit as a payment base, as their higher swipe fee benefit both Apple and the issuing banks.

“Apple’s got deep, deep pockets. I don’t expect them to back away,” he said. “And so it’s just another level of pressure for those of us who are still trying to serve our market,” noted Bob Steen, the CEO of Bridge Community Bank, an $80 million-asset institution in Mount Vernon, Iowa.