In its ongoing effort to improve the value of its new credit card, Apple (NASDAQ:AAPL) continues to expand the number of merchants that qualify for 3% cash-back rewards for Apple Card. The latest addition is Nike (NYSE:NKE), which will now qualify for the highest tier of Daily Cash when users make purchases using Apple Pay at its retail stores in the U.S. and online.

Apple says that Apple Pay will soon be integrated onto Nike's desktop website, while Nike stores outside the U.S. will not qualify for 3% Daily Cash.

Person using Apple Card and Apple Pay

Image source: Apple.

Expanding 3% rewards

Nike is joining a short list of merchants that offer 3% cash back that, in addition to Apple itself, currently consists of Uber (including Uber Eats), T-Mobile, and Walgreens Boots Alliance pharmacy chains Walgreens and Duane Reade.

Considering Apple's long-standing ties with Nike, the new partnership is hardly surprising. CEO Tim Cook has sat on the consumer discretionary company's board of directors since 2005, and Cook became Nike's lead independent director in 2016 after co-founder Phil Knight retired as chairman of the board (Knight stills serves as chairman emeritus). The two companies also collaborate on a special Nike edition of Apple Watch that integrates with Nike's Run Club app.

When Apple Card first launched, the rewards structure didn't seem all that rewarding since Apple was the only merchant offering 3% cash back. Goldman Sachs analysts initially estimated that most users would end up realizing an average cash-back rate of around 1%, which is fairly low relative to comparable credit cards, since Apple purchases represent a fairly modest proportion of an average consumer's annual budget.

Apple responded by expanding the number of merchants that qualify for 3% cash back, which should bolster the average cash-back rate. Never one to shy away from hyperbole, Cook recently called the Apple Card launch "the most successful launch of a credit card in United States ever."

Apple Pay, which earns the Mac maker an estimated 15 basis points of every credit card transaction, also contributes to the company's growing services business. CFO Luca Maestri said last month that revenue from payment services hit an all-time record in the third quarter.

Taking a shot at PayPal

Mobile payments have become increasingly competitive, with Apple Pay threatening to derail PayPal's (NASDAQ:PYPL) growth. That competition prompted PayPal to make its most expensive acquisition ever: the $4 billion deal to buy Honey announced last week.

While that price tag sounds rather rich for a browser extension with just 17 million monthly active users (MAUs), PayPal hopes to scale the coupon-discovery service by pushing adoption on its popular Venmo peer-to-peer (P2P) payments platform. PayPal is also preparing to launch a Venmo-branded credit card next year.

Perhaps more importantly, PayPal wants to own the initial part of the purchase experience, when consumers are still shopping around for deals before even getting to the checkout page where they might see that prominent Apple Pay button.

Cook is now taking shots directly at PayPal. "For Apple Pay, revenue and transactions more than doubled year over year with over 3 billion transactions in the September quarter exceeding PayPal's number of transactions and growing four times as fast," the chief executive said last month.