Apple ruling leaves banks in fruitless pursuit

When the ACCC shut the door on the consortium of Australian lenders seeking to collectively negotiate with Apple over access to the iPhone maker’s 'near field communication' (NFC) technology, consumers globally were the real losers, according to the banks' payments spokesperson Lance Blockley.

It’s the end of the road for Westpac, the Commonwealth Bank of Australia, National Australia Bank and Bendigo & Adelaide Bank after a fruitless effort to lobby the ACCC for the right, ultimately, to collectively negotiate with Apple for a share of its unique NFC technology, allowing the benefits to flow to their own digital wallets.

However, payments expert Lance Blockley claimed the year-long tussle was not about market share, but consumer choice.

“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. The application has never been about preventing Apple Pay from coming to Australia or reducing competition between wallets,” Blockley said. “It has always been about providing consumer choice and innovation."

He added that the fact other financial Institutions (like ANZ) had chosen to accept Apple's “currently restrictive” terms across the use of an eWallet on an iPhone, had not in any way undermined the many public benefits from open access to the NFC function on mobile phones of all makes/manufacturers.

Blockley said the application was backed by a cross section of the community and had been made to ensure banks can 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".

“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," he said.

Apple has consistently stated that exposing the NFC antenna to the banks is against customers’ wishes, would inconvenience consumers and compromise security.

“Apple has been puzzled by the applicant banks’ logically inconsistent argument that they wish to have the ability to charge consumers per transaction fees for using Apple Pay, but are unlikely to be able to do so owing to competition from other issuers like ANZ who do not,” Apple said in its February submission to the ACCC.

Vast potential

Blockley further commented on the the vast potential of the digitisation of the wallet, globally, not merely across mobile payments. 

“Ultimately there is no technical barrier standing in the way of our entire physical wallet becoming digital," he said. "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," Blockley added.

However, the ACCC  disagreed, ruling that by permitting collective negotiation, the regulator would be ensuring the opposite.

"(This) is likely to reduce or distort competition in a number of markets," the ACCC ruled. 

According to the competition watchdog, bank access to the NFC could reduce competition between Apple and Google's Android phones, limited the appeal of payments devices other than smartphones and reduced the competitive tension between the banks in the supply of payment cards.

It could have also artificially directed the development of emerging markets to the use of the NFC controller in smartphones, ACCC Chairman Rod Sims said in a statement.

“This is likely to hamper the innovations that are currently occurring around different devices and technologies or mobile payments," said Sims, adding that the Apple wallet could ultimately speed up bank competition "by making it easier for consumers to switch” across platforms, card types, providers and services.

Apple welcomed the ACCC decision as “great for Australians who want the easiest, most secure and private payment experience possible with Apple Pay".

In its submission, Apple entertained the possibility that the applicant banks have taken the view that customers may be more willing to pay fees to use Apple Pay because of the ease and security of using the service.

"On that basis (banks might) see an opportunity to introduce and condition the market to transaction fees for the use of Apple Pay, with the longer term view to setting a precedent for charging for mobile payments on other digital wallets, in the future, including the banks’ own proprietary wallets,” the tech giant suggested.

“If the applicant banks are granted authorisation to continue to block or delay the expansion of Apple Pay to greater numbers of cardholders in Australia, this will have a significant impact on smaller card issuers who already, or could in the future, rely upon Apple Pay as a means of securing a digital presence in competition with the big banks."

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