ACCC sides with tech giant in banks’ dispute over Apple Pay: What it means for consumers

Fintech Apple Pay

Source: EPA/Monica Davey

Three major banks have been forbidden by the competition regulatorĀ from using their collective might to challenge Apple Pay, a moveĀ the regulator warnedĀ could’ve hurt consumers by stiflingĀ popular technologies like tap-and-go while also making itĀ even harder for AustraliansĀ to switch banks.

Customers at theĀ Commonwealth Bank, Westpac and NAB, as well as the smaller Bendigo and Adelaide banks, have been forced to wait months to access Apple Pay, the iPhone’s digital wallet app,Ā because those banks have insisted on fighting Apple to protect their shares of millions of dollars in fees.

The Australian Competition and Consumer Commission (ACCC) issued a final determinationĀ on Friday denying banks the power to collectively negotiate with Apple for access to the iPhone’s near-field communication (NFC) antenna.

ANZ isĀ unaffected by the ruling as it agreed in April last yearĀ to accept Apple Pay — a moveĀ it claims has attracted a floodĀ of new customers.

American Express and dozens of credit unions have also struck deals forĀ access to the iPhone app, which works with both debit and credit cards.

Read more:Ā Australian banks take on Apple Pay — why ANZ and Amex are the only winners

But the thousands of Australians who don’t have an Amex, ANZ or eligible credit union cardĀ will be forced to wait, perhaps indefinitely,Ā to use their iPhones to make payments,Ā as the holdout banks now say they’ll negotiate individually with Apple.

ā€œWhile 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,ā€Ā chairman Rod Sims said in a statement.

Millions of dollars in credit and debit card transaction fees hang in the balance. By allowing no other smartphone app except Apple Pay to access the iPhone’s NFC antenna, which ā€˜pings’ with card machines, AppleĀ can exact larger fees.

According to US reports, Apple demands 0.15 percent of every credit card transaction processed through Apple Pay. This is a hugeĀ threat to bank revenue, given that the Reserve Bank of Australia will from July 1 impose a cap on interchange fees.

Consumers dodge the ā€˜lock in effect’

Granting the banking bloc’s application could have made it even harder for consumers to switch between the banks,Ā a risk the ACCC chairman dubbed the ā€œlock-in effectā€.

This is because Apple Pay is a ā€œmulti-issuerā€, which means it can accept cards from any financial institution with which it has a pre-existing deal — unlike bank apps, which only accept their own cards.

ā€œApple 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 ā€˜lock-in’ effect bank digital wallets may cause,ā€ Sims said.

What the banks areĀ fighting for is the ability to connect their smartphone apps to the iPhone’s NFC chip. Currently, only Apple Pay is allowed to connect.

If the banksĀ had been allowed toĀ use collective bargaining to gainĀ access to the antenna, then each bank would’ve been able to protect the customer bases — and fees — they’ve built around those apps and card payments.

However, collective bargaining could have reducedĀ ā€œthe competitive tension between the banks in the supply of payment cards,ā€ Sims said.

It could have also killed offĀ popular innovationsĀ like tap-and-go, smartwatches, fitness wearable devices and other technologies ā€œin their infancyā€,Ā he said.

ā€˜Apple just wants your money’

The banking coalition argued the caseĀ had ā€œalways been about consumer choiceā€ and that the denial would stifle competition and mobile wallet innovation.

ā€œApple 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,ā€ the banks said in a joint statement.

The banks said they would now review their strategiesĀ separately.

The ACCC had already denied the banksĀ an interim authorisation to jointly negotiate with Apple in August 2016. In November, itĀ published a draft determination that foreshadowed Friday’s verdict.

Apple has not commented publicly on its victory.

This article was first published by The New Daily. You can read it here.Ā 

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David Lake
David Lake
5 years ago

The beginning of the end for the traditional banking system. Can’t wait although I’ll most likely not live long enough to see it happen. My grandchildren definitely won’t be starting up a school savings account with the CommBank I can promise you that.

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