Apple first introduced its mobile payments solution in 2014 and has been gradually expanding it both domestically and internationally since then, most recently announcing a handful of new features and countries at WWDC this month. What’s interesting to note, however, is that Apple is bringing in just $0.15 per every $100 spent using Apple Pay. Brian Nichols of InvestorPlace points out that rate is much lower than the 2 percent to 4 percent rates collected by companies like MasterCard and Visa. The solution suggested by Nichols? Make Apple Pay an actual transactor of payments…

Interestingly, Nichols points to American Express Company as a potential acquisition target for Apple. Acquiring Amex would allow for Apple to more seamlessly transition to being a transactor of payments, therefore collecting the higher 2 percent to 4 percent rate. But one of the primary reasons Apple should look at Amex, Nichols argues, is the audience it attracts.

He points out that American Express generally “attracts the wealthy” and “does not bottom feed off low-income consumers or students like MasterCard or Visa.” One notable thing is that Amex customers pay annual fees for usage, but not the high interest rates of a Visa or MasterCard. Because of both of these factors, Amex is generally able to negotiate higher merchant fees as its customers generally spend more.

American Express has a market capitalization of $60 billion, which seems steep and is much higher than Apple’s largest acquisition to date – Beats at $3 billion. It’s no secret that Apple has more than enough cash on hand to make the acquisition, but Apple is notorious for not making large acquisitions. If Apple were to spend the $60 billion and acquire American Express, then it would absorb its $30 billion business with operating margins of 24 percent. But the big factor is Apple would be able become a transactor of payments, collecting 2 percent to 4 percent rates versus the $0.15 per $100 it collects now.

Consumers pay annual fees for usage, but do not pay the high interest rates of other credit cards. If Apple were to acquire AXP stock and thereby enter the payment processing space, it would be wise to leave American Express’s business as is. It is a business model that works where AXP can charge merchants higher fees than either MasterCard or Visa because its customers spend more.

Therefore, Apple would absorb American Express’s $30 billion business with operating margins of nearly 24%, but it would add itself as an “iconic global consumer brand.” Keep in mind that AXP has exclusive partnerships with the likes of The Coca-Cola Co (KO), Walt Disney Co (DIS) and Nike Inc(NKE) where much of American Express’s revenue is created.

Nichols points out that Statista estimates more than $1 trillion in annual transactions through mobile devices by 2019. Nichols assumes that Apple Pay will account for 50 percent of those transactions, thus meaning that at the current $0.15 per $100 rate, Apple would bring in $750 million from Apple Pay fees. On the other hand, if Apple became a transactor of payments and collected 2 percent per transaction, it would bring in $10 billion in that time. Or $20 billion at 4 percent rates. Not to mention, the existing American Express business that would remain if Apple acquired the company.

And if Apple acquired American Express, it would have to work to become a transactor of payments. At the current $0.15 per $100 rate, Apple would need $60 trillion worth of Apple Pay transactions to justify the acquisition. For comparison’s sake, that’s roughly 2.5 times the gross domestic product of the United States in 2013.

What we do know is that transaction volume grew five-fold year-over-year during its last quarter and that Apple’s App Store and iOS is the worldwide leader in mobile transactions. Furthermore, we know that Statista anticipates more than $1 trillion in annual transactions through mobile devices by 2019.

Therefore, let’s say that 50% of the transactions are on iOS — $500 billion in transaction volume by 2019. That can be $750 million for AAPL if it keeps Apple Pay as is. Or, it could be $10 billion to $20 billion in revenue if Apple acquires AXP and makes Apple Pay an actual transactor of payments where it collects 2% to 4% in fees.

Obviously, there are downsides to this idea. In acquiring American Express and becoming a transactor of payments, Apple would position itself as a competitor to companies like Visa and MasterCard, as well as banks, all of which Apple needs to be working with and not necessarily against.

There’s a lot of speculation to this idea, but in an era of stagnant iPhone growth and Apple trying to position itself to investors as a services company, Apple Pay represents a huge area of growth opportunity. At the current rate of $0.15 per $100, there’s not much opportunity, but at 2 percent to 4 percent, it’s an entirely different ball game.

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