Apple in Talks to Launch Apple Card in India: A Game-Changer in the Payments Sector?

Rajesh
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The renowned iPhone manufacturer, Apple, is reportedly engaging in discussions with banks and regulators to introduce its credit card, known as the "Apple Card," in India. During his visit to India in April, Apple's CEO, Tim Cook, met with HDFC Bank CEO and MD Sashidhar Jagdishan, according to reliable sources familiar with the matter.


In addition to HDFC Bank, Apple is also exploring opportunities with the National Payments Corporation of India (NPCI) to potentially launch Apple Pay in the country, as per a third source cited by Moneycontrol. The exact nature of these discussions remains uncertain, whether they pertain to the integration of Apple Card with NPCI's Rupay platform or the Unified Payments Interface (UPI). A significant advantage of launching a Rupay Credit Card would be its compatibility with UPI, enabling customers to make seamless and fast payments by scanning QR codes using their mobile phones.

This development coincides with the increasing prevalence of mobile payments in India. Tech giants like Apple, Google, Amazon, and Samsung are actively expanding their presence in the payments sector, with ambitious plans in the financial services domain. These companies have already developed payment apps and are eager to make significant strides in this lucrative market.

Notably, Apple has also held discussions with the Reserve Bank of India (RBI) to address the intricacies surrounding the Apple Card, as revealed by sources. However, it appears that the RBI has requested Apple to follow the regular procedure for co-branded credit cards, without providing any special considerations for the tech giant.

Both Apple and HDFC Bank have refrained from commenting on the matter, as they did not respond to email inquiries. Similarly, the RBI has not provided any official response regarding discussions with Apple.

Sources indicate that Apple intends to launch its co-branded Apple Card in partnership with HDFC Bank. However, the discussions are still in the early stages, and no definitive decision has been reached at this point. The specific details of the discussions and the potential launch timeline for India remain undisclosed.

One source suggests that Apple may be considering significant deviations from the standard co-branded credit card model in India. However, it remains unclear whether the company is willing to make the necessary compromises to introduce the card successfully in the Indian market.

India holds strategic importance for Apple, with iPhone sales experiencing rapid growth, albeit from a relatively low base. In FY23, Apple's revenue in India reached around Rs 50,000 crore (approximately $6 billion), representing a 50% growth compared to Rs 33,500 crore (around $4 billion) in FY22. Apple's global services revenue currently stands at around $80 billion. Therefore, redirecting a significant portion of these transactions through the Apple Card could have a substantial impact.

During Cook's visit to India in April, Apple inaugurated exclusive retail stores in Delhi and Mumbai. Furthermore, the company has been gradually shifting a substantial part of its iPhone production to India. Industry experts anticipate that India could account for nearly 25% of Apple's total mobile phone production within the next three to four years.

Currently, Apple holds approximately 4% of the overall smartphone market share in India, serving roughly two crore users. If 20-30% of Indian smartphone users switch to iPhones over the next decade, as seen in other middle-income countries, India has the potential to become Apple's third-largest market, following the US and China.

Interestingly, the reason behind Apple's consideration of launching the Apple Card in India ahead of Japan or other European countries could be the fact that Apple currently does not accept card payments in India. In India, UPI powers most App Store purchases, along with services like iCloud storage and music.

This situation arose after the RBI mandated that third-party websites should not store card details on their platforms but rather in a tokenized form. The regulator also stipulated that all payment data should be stored exclusively on Indian servers. Additionally, the RBI introduced a directive requiring one-time customer permission through OTP for standing instructions, making UPI a more seamless option for Apple customers.

"One of the sources mentioned above stated, 'Apple is cagey about several of these directions. Hence the company decided to stop card payments in India temporarily. It makes sense for the company to explore launching its own credit card before it restarts card payments in India, preempting the use of other credit cards on the platform.'"

Contrary to the US, where Apple offers a plain card with only the Apple logo and the customer's name on the front, Indian regulations demand that Apple takes a back seat, with the bank driving the card. The Goldman Sachs name and Mastercard branding also appear on the back of the Apple Card in the US. Additionally, the Indian co-branded credit card regulations require the absence of a printed card number on the physical card, posing challenges for Apple in adhering to these guidelines.

Last year, the RBI explicitly stated that the bank's partner cannot store customer data or transaction data. This means even Apple Card details cannot be stored on Apple's platforms, unlike in other countries where Apple operates.

"One of the sources mentioned above commented, 'To get all the premium Apple customers on board for their credit card is a great proposition for the banks, but none of them can offer any substantial privileges as the regulations around this are strict.'"

So, what advantages does the Apple Card offer to customers? Integrated with Apple Pay, the Apple Card allows users to receive their reward money directly in their Apple wallet, with an annual interest rate of 4.15 percent. Notably, there are no annual fees associated with the card. In the US, Apple Card users have the option to purchase Apple products in interest-free installments. Additionally, customers can enjoy approximately 3-5 percent cashback on Apple product and service purchases. Apple could also collaborate with other premium brands, offering 2-3 percent cashback or reward points on purchases made through these partners.

In the US, Apple offers a daily 2 percent cashback when users make payments using the Apple Card through their Apple Watch or iPhone. This can be done by adding the credit card to Apple Pay and completing the payment using NFC-enabled terminals. Furthermore, the company provides 3 percent cashback at major merchants.

As Apple explores the potential launch of the Apple Card in India, it remains to be seen whether the company can navigate the stringent regulations and strike a deal that satisfies both the Indian banking sector and its own aspirations. If successful, the introduction of the Apple Card could revolutionize the payments landscape in India, benefiting both Apple and its customers.

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