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Apple Pay may reach first country beyond US this year

The mobile payments service is on the verge of expanding to Canada, according to the Wall Street Journal. But will Apple be able to seal the deal?

Apple Pay may land in Canada this year if Apple can negotiate a deal. James Martin/CNET

Apple Pay may be setting up shop in Canada later this year.

Apple is currently chatting with Canada's six largest banks about a possible November rollout of Apple Pay, people familiar with the matter told the Wall Street Journal for a story published Friday. If the negotiations prove successful, the trip to Canada would be the first step for Apple Pay beyond the United States.

Launched last October, Apple Pay enables owners of the iPhone 6, iPhone 6 Plus and Apple Watch to pay for items on the go via a wireless technology known as NFC (near-field communication). Apple has been gaining support for the service among US banks, retailers and other businesses. But the service also needs to expand globally to countries such as China and Canada, where the iPhone's share of the smartphone market has been growing since the debut of the iPhone 6.

Some people in Canada and other countries have been able to use Apple Pay outside the US by changing their location on their phones and using US credit or debit cards. But Apple ultimately needs to officially bring Apple Pay to other countries by working with local banks.

Apple Pay has already been struggling to win support in China, where banks are balking at the high fees that Apple wants to charge them for each transaction. And apparently, the same obstacle is so far tripping up Apple in Canada.

Canadian banks are worried about the "onerous" terms involved in agreeing to use Apple Pay, the Journal's sources said. In the US, Apple reportedly gets a 0.15 percent cut, or 15 basis points, for each credit card transaction and half a cent for each debit card transaction. But in a base case, Canadian banks could have to pony up transaction fees ranging from 15 to 25 basis points, one source said.

Another problem is security. In the US, Apple Pay has faced charges that criminals are using it with stolen credit cards. Apple and several US banks have dismissed such concerns, according to CNNMoney. But the Canadian banks have not.

Apple Pay currently requires your fingerprint to authenticate a purchase. But the banks in Canada want a "secondary authentication," such as a PIN or one-time passcode, according to the Journal's sources. The banks have reportedly formed a consortium and hired an outside consultant to design a security protocol to be used as an additional layer to authenticate transactions. But for Apple, that secondary authentication would eliminate much of the simplicity of using Apple Pay and potentially result in even higher costs.

The Canadian banks currently negotiating with Apple include Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada, according to the Journal's sources. Altogether, those six account for 90 percent of all retail bank accounts in the country, providing incentive for Apple to pull off a deal in the face of any existing obstacles.

An Apple spokeswoman declined CNET's request for comment.