The Australian Competition and Consumer Commission (ACCC) has held its ground against four of the country’s biggest banks, rejecting a push to allow them to both collectively bargain with Apple and collectively boycott Apple Pay.
The Commonwealth, Westpac, NAB, and Bendigo and Adelaide Bank asked the regulator several months ago to allow them to deal with Apple and gain access to its digital wallet. ANZ is the only one of the Big Four banks to sign on with Apple Pay, joining last May. A number of smaller banks, including mutuals, also have access Apple Pay.
The ACCC issued a draft decision last November turning down the proposal, giving the banks one more chance to put their case, but today’s final determination means they’ve failed.
The banks were fighting 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. The banks want to offer their own integrated digital wallets to iPhone customers in competition with Apple’s digital wallet, without using Apple Pay.
The ACCC’s decision leaves three of Australia’s biggest banks locked out of iPhone contactless payments system via the NFC antenna, and means a potential decline in lucrative credit card income as people switch to payments using their phone.
ACCC chairman Rod Sims said that while the competition watchdog accepted that working collectively would give the banks a better bargaining position with Apple, any benefits would be outweighed by detriments.
“We are concerned that the proposed conduct is likely to reduce or distort competition in a number of markets,” he said.
The competition boss said three things stood out as Apple and Android phone operating systems compete on differing business models.
Sims said the ACCC was concerned that if the banks had NFC access, “this would affect Apple’s current integrated hardware-software strategy for mobile payments and operating systems more generally, thereby impacting how Apple competes with Google”.
He said digital wallets and mobile payments were changing rapidly as the emerging technology evolved
“Consumers are used to making tap and go payments with payment cards, which provide a very quick and convenient way to pay. There is also a range of alternative devices being released that allow mobile payments; for example, using a smartwatch or fitness device. It is therefore uncertain how competition may develop,” he said.
“Access to the NFC in iPhones for the banks could artificially direct the development of emerging markets to the use of the NFC controller in smartphones. This is likely to hamper the innovations that are currently occurring around different devices and technologies for mobile payments.”
Sims said the ACCC’s other issue was that: “Apple Wallet and other multi-issuer digital wallets could 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.”
Lance Blockley a payments specialist at FTI Consulting, an independent global business advisory firm, and spokesperson on behalf of the applicants, said he is disappointed with the ACCC’s decision.
“This case has always been about consumer choice. The applicants made this application to seek to ensure they could participate in the future of mobile wallets, and not have the course of development for mobile wallets in Australia dictated by a single overseas corporation,” Blockley, said.
“The application attracted strong support from many of Australia’s leading retailers and other financial institutions who also recognise the public benefits of open NFC access, and the subsequent flow on benefits for mobile wallet innovation and competition in Australia.
“Whilst we thank the ACCC for their time and diligence in reviewing our application, and recognising both the imbalance in negotiating positions and that there were real issues for consideration, we are disappointed that the finely balanced draft determination was not tipped in the final decision, given our considerable effort to demonstrate the public benefits inherent in open NFC access, and the subsequent flow on benefits for mobile wallet innovation and competition in Australia.
“Mobile wallets are currently overwhelmingly focussed on mobile payments, but will soon take in loyalty programs, mass transit ticketing, access, identity and a great number of other future innovations. Ultimately there is no technical barrier standing in the way of our entire physical wallet becoming digital. Apple has a stated desire to own the entire mobile wallet, and will use the beachhead into mobile wallets afforded to them by complete control over mobile payments on iPhone to exert control over the rest of the digital wallet. This in our view is aimed at increasing the services revenue they can earn from iPhone users.”