Apple's reputation as a negotiator is rather simple—it doesn't negotiate.

Notably, the company went ahead with the 2007 launch of the iPhone, knowing that Cisco had already used the brand for its own products. Apple's approach to banks is no less forgiving. 

The Apple Pay contract that issuers have to sign is "the most one-sided agreement I have ever seen," Michael Battagliese, senior vice president and head of debit and emerging markets for Citizens Bank, said at SourceMedia's PayThink conference in October. "It will be interesting to see what will happen if Apple were to come back and say they wanted more [fees] in the future." 

But Strategic Resource Management, a negotiation company, contends issuers and merchants have a chance to win more favorable terms with Apple. SRM currently has about 200 clients, mostly community banks and credit unions. About 90% of those clients are interested in working with Apple Pay, and just over half have already signed with Apple, but have complained about the expense.

"People want to know what can be done to bring the price down," said Bob Koehler, executive vice president of SRM, which is planning to push a contract negotiation service for issuers working with Apple Pay. Koehler would not divulge how much his clients pay Apple, citing confidentiality agreements.

The key is not Apple Pay as much as it is potential competitors such as Samsung that use technology that can scale faster than Apple's Near Field communication-based wallet. Samsung reportedly is working with LoopPay on a contactless system that would use a fob or smartphone case to transmit a signal that emulates a traditional card swipe. That technology would work even with point of sale devices that cannot read NFC signals.

"If Samsung and LoopPay come into the market and offer more than just a basic wallet service, that could be an alternate network and drive down the costs of Apple Pay transactions," Koehler said.

Samsung has also bolstered its merchant services by partnering with I Love Velvet, which allows store employees and consumers to browse inventory, add product discounts and promotions, and add or remove items from customer shopping carts. Merchants can also use I Love Velvet's cloud-based business management tool to access remote, real-time reports from specific stores.

The challenge for issuers is Apple is known to be so controlling that it would rather limit its opportunities than try to reach the broadest market possible.

"There are a very limited number of devices that run on iOS and because of Apple's stranglehold over hardware manufacturing, it limits businesses in terms of peripherals," said Joe Pergola, president of AccuPOS, a point of sale developer.

If a merchant wants a different scanner or bar code label printer to add to an Apple device, it is difficult for a software company to have integrations available for it, Pergola said. "Apple is very difficult to work with," he added.

But even given Apple's tough stance, other players in the payment ecosystem have some leverage.

"Apple's approach with NFC, without data, no net settlement or loyalty capabilities, is misaligned with merchant interest," said Richard Crone, a payments consultant.

Apple has not extended data rights to Apple Pay participants, which shuts out a number of other value-ads such as data-driven cross selling and marketing, he said. "The merchants don't even know who the consumer is … and they certainly want to know that." 

A number of merchants, including Walmart, are creating their own mobile payment system, CurrentC, which has been similarly controlling — certain retailers chose to block Apple Pay and all other NFC payment methods, including contactless plastic cards, to reinforce their commitment to the CurrentC wallet. This alternative is one of several options merchants can use to try to shake Apple's stance to get more favorable treatment.

"The merchants have a bigger bargaining position with issuers than Apple because the merchants control the last 8 centimeters to the point of sale," Crone said.

David Heun contributed to this article.

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry