The Apple iPhone and Apple Watch are arranged to be photographed after they were used to demonstrate to reporters how to pay using the Apple Pay service
The Apple iPhone and Apple Watch are arranged to be photographed after they were used to demonstrate to reporters how to pay using the Apple Pay service at an Apple store in Beijing, China, February 17, 2016. Reuters/Damir Sagolj

In a bid to enter the Chinese market, Apple has reportedly slashed its Apple Pay fees for the banks in China. According to a report, the multinational tech giant agreed to collect around 0.07 percent of every Apple Pay transactions from Chinese banks, more than half of the 0.15 percent fee it collects from US banks.

According to Caixin, Apple (NASDAQ:AAPL) agreed to a compromise when Chinese banks argued the charges it originally asked for were too high. The Cupertino, California-based company started negotiations in the Asian market in 2014, but the talks were suspended over fee issues. The iPhone maker and the banks finally reached a deal in December.

“Apple is tough but so are the four banks,” said one employees of the so-called Big Four banks – Bank of China, China Construction Bank, Industrial and Commercial Bank of China, and Agricultural Bank of China. “The final agreement is a result of compromise from both sides.”

Offering discount of 0.07 fee for every transaction, Apple was able to convince 19 banks to let their customers link their bankcards to Apple Pay. Those that would want to join the partnership later on may not be eligible for the special price anymore. In comparison, American banks pay 0.15 percent per transaction to Apple.

Apple faces competition from industry titans Alipay from Alibaba and WeChat from Tencent. However, unlike Alipay and WeChat, Apple Pay does not require users to open mobile applications. Apple Pay allows users to make payments by simply passing their devices near contactless point-of-sale terminals in stores. The devices are able to wirelessly communicate to banks using a short-range technology called near-field communication (NFC).

Apple Pay, which caters to iPhone 6 and iPhone 6s users, arrived in China on Feb. 18. The launch saw 10 million users signing up for the service in the first hour, though some users encountered signing up problems. The issue was resolved the next day. Local reports said a close to 40 million users signed up for the service in one day. Apple will start collecting fees from the banks in two years.

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