Apple Pay Is a Marketing Expense for Banks

  • Philip Ryan
  • October 22, 2014
  • 2

bofa_applepayWhy did banks give up the bps to Apple?

“It’s the marketing benefit that makes it worthwhile,” said Tommy Marshall, a partner at Capco. “That’s what makes me suspect the deals the banks cut with Apple were short-term.”

He added, regarding Apple’s deals with the banks, “I think the other shoe is yet to drop on economic considerations.” This means it may be a trip back to the negotiating table for Apple next year, but by then, Apple Pay data will do most of the talking.

Marshall speculated that 90% of Apple Pay purchases would be in-app purchases rather than transactions at the point of sale, which will be quite limited at the start. “Banks were willing to give up the basis points because for this first year, it’s going to be a small amount,” he said.

The transaction figures may be small, but the co-branding opportunities are an easy way to say that your bank is on the cutting edge. “Co-branding with Apple creates consumer interest and awareness,” Marshall said. Many banks, feeling battered by the onslaught of technology, can use that these days. And it’s not just teh biggest banks that are trumpeting their connection to Apple Pay. First Tennessee Bank sent out a press release saying it worked with Apple Pay on Monday.

The regional to super-regional banks are expected by their customers to have the latest and greatest, Marshall said, and that can be a challenge with resources so tight. Apple Pay allows the to score an easy marketing win and get their customer’s attention.

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Philip Ryan is Senior Editor of Bank Innovation and Senior Director of INV Fintech. He began covering financial services in 2012 and has more than 15 years' experience in online journalism, which makes him quite old. He can be reached at

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