Unless you have worked in retail or slogged in the trenches of a bank, you probably aren’t familiar with “swipe fees”. In a nutshell, every time you pay for something with a credit card the issuing bank takes a small cut of the total purchase price off the top … generally about two percent. Walk into a store, pay 10 dollars cash for an item, and the retailer puts ten bucks in the till. Pay for the same item with a credit card, and the retailer gets $9.80 … the other 20 cents is skimmed off the top and goes directly into the Giant Profit Buckets of the bank.
Two percent might not seem like a lot … until you realize that there are $12 billion dollars in retail credit card transactions every day in the U.S. alone. If you aren’t up for the math, that’s $240 million bucks every single day. It’s not exactly chump change and one of the reasons you see so many commercials from the assorted credit card companies and issuers urging you to use your credit card for everything from groceries to junk food at the ball park.
Now then. Unless you just crawled out from under a rock somewhere, you are probably aware that financial institutions in general and banks in particular love money. Getting them to part with even a tiny bit of it is like trying to separate a six year-old from a chocolate bar. And yet, incredibly, Apple has somehow persuaded them to give up a cut of these fees as a part of the Apple Pay business model … without raising the fees at the retail end.
How? Who knows. It boggles the mind to far, far beyond the point of comprehension. Steve Jobs was rightly known as a legendary negotiator, but Tim Cook must be a whole new level of badass in the boardroom. If anyone ever writes a book about this particular business deal, I am the first in like to buy it.