The competition watchdog is set to turn down an request by four of Australia’s biggest banks to both collectively bargain and boycott Apple’s digital wallet on Apple Pay.
The Australian Competition and Consumer Commission (ACCC) today issued a draft determination to deny authorisation to the Commonwealth, Westpac, National, and Bendigo and Adelaide Bank to collectively push for access to Apple’s smartphone payments system.
The banks wanted to use their collective might against the world’s biggest company on two key issues – access to the Near-Field Communication (NFC) antenna in iPhones, which would give them the ability to create digital wallets in competition to Apple Pay, and the ability to remove restrictions Apple has on banks passing on fees the tech company already charges them for the use of Apple Pay.
The banks have been thwarted by Apple, which has locked out third party digital wallets, and thus deprived the banks of the millions in revenue normally made from interchange fees on payments.
They have been unable to cut a deal with Apple, and ANZ, which has around 20% of the market, beat them to the punch back in May, forcing its competitors to rethink their strategy following increased retails demand for credit cards and deposit accounts linked to Apple Pay.
A number of smaller banks, including mutuals, also have access Apple Pay.
The risk for the majors is that locked out of iPhone contactless payments system via the NFC antenna, their lucrative credit card income will decline as people switch to paying using their phone, and they’ll also be locked out of making new digital product offerings.
The banks argued that letting them collectively bargain would increase competition, innovation and pricing efficiency in digital wallets, as well as “greater consumer confidence leading to increased adoption of mobile payment technology in Australia”.
But Sims responded that banks already offer competing digital wallets on iPhones without direct access to NFC.
“Banks can also offer digital wallets on the Android platform,” he said.
“Digital wallets and mobile payments are in their infancy and subject to rapid change. It is therefore uncertain how competition may develop with the availability of mobile payments and possible future innovations.”
A key concern for the ACCC was that giving the nod would also allow the banks to agree not to sign up to Apple Pay for three years, with the competition watchdog saying “the proposed conduct could reduce or distort competition in a number of markets.”
A reduction in “competitive tension between the banks individually negotiating with Apple” was also on the ACCC’s mind.
“Apple Wallet and other non-bank digital wallets could represent a disruptive technology that may increase competition between the banks by making it easier for consumers to switch between card providers and limiting any ‘lock in’ effect bank digital wallets may cause,” Sims said.
Speaking on behalf of the banks, Lance Blockley, said the draft determination means “effectively there will be no competition against Apple for mobile payments on the iPhone”.
“Whilst we are disappointed with this draft result, our application is not just relevant to Australia – the same issues around consumer choice and the freedom to offer genuine competition against Apple Pay arise globally,” he said.
The ACCC will now take submissions on its draft decision and Blockley said the applicants will respond with additional supporting arguments for authorisation.
The ACCC plans to finalise the matter by March 2017.