The U.S. technology giant Apple is accelerating plans ahead of a possible entry of its mobile payment and digital wallet service into the Israeli market, as regulators are working to introduce the EMV international security standard for electronic payments.
Sources said that Apple executives have held a round of meetings with Israeli banks and credit card companies to discuss possible contractual arrangements and ceilings that would be set on payments made through the company’s Apple Pay app.
Google has also been moving forward with its Google Pay app ahead of a November 30 date set by the Bank of Israeli when big businesses will be required to begin using the more secure EMV standard for payment via mobile devices.
Apple’s move comes as the comes during a period of turbulence for the Israeli payments and finance sector.
Under the so-called Strum law for increasing competition in the banking sector, Israel’s two biggest banks are spinning off their credit card issuing subsidiaries with the hope of spurring more competition and innovation.
Earlier this week, Bank Hapoalim said it would divest the last of its stake in Isracard, the country’s biggest credit card issuer through a stock dividend to its shareholders. Bank Leumi sold its unit, now called Max, to the U.S. private equity fund Warburg Pincus last year.
Apple Pay generally collects high fees from credit card issuers for its service that range between 0.15% and 0.25% of each transaction. So, for instance, if a shopper buys 1,000 shekels ($290) of merchandise at a store and pays through Apple Pay, the store will pay about 1%, or 10 shekels, to the payment processor. The processor then pays 6 shekels of that to the credit card issuer, which in turn would pay Apple 2 shekels.
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Israelis do about 350 billion shekels worth of credit card purchases every year, which means Apple could expect to generate annual revenues in the tens of millions of shekels. Apple’s iPhone has about a 20% share of the local smartphone market, and that is expected to grow in coming years.
Apple Pay was launched about six years ago and today operates in about 60 countries around the world.
If Apple Pay and Google Pay do enter the Israeli market, they will face competition from local banks. Hapoalim has introduced its Bit service and in 2017 Leumi started its branchless-banking unit Pepper, which includes its Pepper Pay app.
Israel Discount Bank, which for now has been allowed to retain its 72% stake in its Cal credit card subsidiary, has been offering the PayBox app in Israel after acquiring a license for it in 2017.