Apple Pay defeats Australian banks in payments punch-up
Apple Pay has emerged victorious in its long-running feud with four domestic banks over their permission to collectively bargain with Apple and boycott Apple Pay.
The Australian Competition and Consumer Commission (ACCC) has issued a determination denying authorisation to the Commonwealth Bank of Australia (CBA), Westpac, National Australia Bank (NAB), and Bendigo and Adelaide Bank to bargain and boycott.
Apple has the largest smartphone market share in Australia.
As Banking Technology reported last year, it was predicted that ACCC would make this decision. The battle began in mid-2016 when Apple bit back over the Australian banks’ “cartel”.
ACCC chairman Rod Sims says it is “not satisfied, on balance, that the likely benefits from the proposed conduct outweigh the likely detriments” and is “concerned that the proposed conduct is likely to reduce or distort competition in a number of markets”.
The banks sought authorisation to bargain with Apple for access to the near-field communication (NFC) controller in iPhones, and “reasonable” access terms to the App Store. This access would enable the banks to offer their own integrated digital wallets to iPhone customers in competition with Apple’s digital wallet, without using Apple Pay.
“While the ACCC accepts that the opportunity for the banks to collectively negotiate and boycott would place them in a better bargaining position with Apple, the benefits would be outweighed by detriments,” Sims says.
The banks argued that access to the NFC controller on iPhones would enable them to offer competing wallets on the iOS platform which would lead to “increased competition and consumer choice” in digital wallets and mobile payments.
“First, Apple and Android compete for consumers providing distinct business models. If the applicants are successful in obtaining 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,” Sims says.
“Second, digital wallets and mobile payments are in their infancy and subject to rapid change. In Australia, 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.”
“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 says.
The ACCC consulted with consumers, financial institutions, retailers and technology companies in reaching its decision.
Meanwhile, a number of other financial institutions in Australia have welcomed Apple Pay, namely ANZ, American Express, ING Direct, Macquarie Bank and Cuscal (and its 31 member banks and credit unions).
