As long as the merchant is insured for the cost of the fraudulent transaction, I'm not sure that it needs to be that high. If Apple only covers your £2,500 and errors with higher transactions stating you need to go to a traditional card and do your extended due diligence above that mark, most merchants are going to be fine with that. The clerks at higher end places will quickly learn the limit.

The Pay system provides for easier deactivation of cards, means that compromised merchant system can't give hackers millions of good credit/debit card numbers. It means that merchants won't face the spill over issues. How many people are a little nervous using their credit cards at a Target or a Home Depot today

I think Apple has given banks proof that the fraud rate will be lower with their system than traditional credit cards. In exchange for the reduced risk from the Pay system, the banks have probably agreed to give them some fraction of a percent.