Skip to main content

The Globe and Mail

Why Apple Pay’s Canadian launch bypassed banks

A customer uses an iPhone to pay via the Apple Pay system. The service’s Canadian launch revealed a rift between Apple and the big banks.

Chris Ratcliffe/Bloomberg

Apple Pay's Canadian launch has exposed a rift between Apple Inc. and the big banks, and pitted global credit-card companies against each other.

When Apple announced Tuesday it is expanding its Apple Pay mobile-payment service to Canada, the company bypassed Canadian banks and the most popular credit-card networks because negotiations were dragging, according to sources.

Apple Pay will be rolling out in Canada and Australia later this year, and adding Spain, Singapore and Hong Kong in 2016, following launches in the United States in 2014 and Britain earlier this year.

Story continues below advertisement

But the service, which allows consumers to make small purchases with up-to-date versions of iPhones at properly equipped merchant terminals, will be limited to American Express cardholders.

No Canadian bank offers an AmEx card that can be used with Apple Pay.

The deal delivered a surprise to many observers who had been expecting a widespread launch that would propel mobile payments into the mainstream in Canada. But that goal appears distant now, with the Big Six banks – touted for months as the most likely vehicle for the Canadian launch – on the sidelines and saying little publicly about Apple Pay.

A source said the launch likely had less to do with Apple's strategy for entering Canada specifically, and more to do with a global push that aims to negotiate by credit-card network rather than bank by bank.

Indeed, sources familiar with the negotiations say the most pointed standoff was between Apple and credit-card companies.

Rather than allowing negotiations with multiple parties to drag on, Apple decided to partner solely with American Express Co., which will help the company stick to its rumoured timeline of a November rollout in Canada.

Apple could not be reached for comment.

Story continues below advertisement

Credit-card companies have their own ideas about how to propel mobile payments.

Visa is intent on using its own Visa Digital Enablement Program, which aims to simplify mobile commerce for payments systems. In May, Visa signed a partnership agreement with Google that made the tech company its first international partner for this offering. That decision has likely influenced other mobile payment negotiations because Google recently launched Android Pay, a direct competitor to Apple's product. Visa could not be reached for comment.

MasterCard was reportedly willing to agree to Apple's terms, sources said. In a statement responding to a request for comment, the company said it is focused on having "MasterCard cards on all devices, working in partnership with all platform providers."

However, American Express may have been the most flexible among the credit-card companies, given that the company has suffered declining sales and profit in recent quarters after it ended a relationship with Costco Wholesale Co. that affected 10 per cent of its outstanding cards.

The arrangement doesn't appear to be the ideal rollout for Apple.

"In Canada, for Apple Pay to really take off, Apple will need to make it easier on the average consumer to participate by signing up more of the issuers than just AmEx," said Rob Cameron, chief product and marketing officer at Moneris Solutions Corp., Canada's largest processor of credit- and debit-card purchases. "Part of it will be driven by the consumer response," he added.

Story continues below advertisement

The number of AmEx cards in Canada is about four million, versus more than 70 million cards combined for Visa and MasterCard, potentially limiting that response.

"AmEx is a very small player, especially when you overlay the number of merchants that accept the card," a source at a Canadian bank said. "You can't really call it an entry strategy, but it's an interesting deal with AmEx."

Still, no one is ruling out a wider launch of Apple Pay in the future.

Canadian banks have taken different approaches to potential deals with Apple. Some have expressed concerns about whether the tech behemoth's brand would push their own brands into a lesser role with consumers, while others are more keen to form a partnership.

But the banks appear to be united in taking a tough negotiating stance and emboldened by Apple's experience in Britain. After U.S. banks agreed to pay a reported fee of 0.15 per cent to Apple on all purchases, British banks negotiated a far lower fee, according to the Financial Times.

Report an error Editorial code of conduct Licensing Options
As of December 20, 2017, we have temporarily removed commenting from our articles as we switch to a new provider. We are behind schedule, but we are still working hard to bring you a new commenting system as soon as possible. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.