Banks lose Apple Pay fight

ACCC rejects banks’ application to band together for Apple Pay negotiations

A group of banks has lost its fight with Apple over the iPhone-maker’s payments platform.

The Australian Competition and Consumer Commission today formally knocked back an application from the banks to act as a cartel in negotiations over Apple Pay. The application was submitted by the Commonwealth Bank of Australia, Westpac, NAB, and Bendigo and Adelaide Bank.

Currently of Australia’s ‘big four’ banks, only ANZ supports Apple Pay.

The ACCC released draft determination in November that indicated it was disinclined to grant the banks’ application.

The banks in mid-2106 applied for the right to band together for joint negotiations with third-party digital wallet providers.

Their application named Google and Samsung as well as Apple as examples of digital wallet providers, but the banks later made clear that their real target was Apple.

The banks said that there were three key issues they wanted to bargain with Apple over. They were the right to pass on Apple Pay fees to consumers, security standards, and access to the Near Field Communication (NFC) radio of the iPhone.

Last month the banks made clear that their key focus was enabling their apps to have access to the iPhone’s NFC capabilities for contactless payments.

Apple currently allows only its payments platform to use NFC. By way of contract, Google’s Android mobile platform allows app makers including banks to access handsets’ NFC capabilities. This allows banks to integrate NFC-based contactless payments directly into their apps.

“NFC access is required to enable real choice and real competition for consumers, and to facilitate innovation and investment in the digital wallets available to Australians,” the banks said in their most recent submission (PDF) to the ACCC. “All customers benefit from real competition.”

Apple has previously said that even if the ACCC granted the banks’ application it would not offer access to the iPhone’s NFC capabilities.

“The ACCC is not satisfied that NFC access, through increasing competition and choice between digital wallets, is likely to lead to public benefits from increased adoption of mobile payments or that that this greater adoption of mobile payments is likely to lead to more efficient use of the existing Australian payments infrastructure,” the ACCC’s final determination on the issue states.

“While the ACCC has recognised a small public benefit from increased competition in digital wallets resulting from NFC access, the ACCC notes that in the likely future without the conduct, the Applicants will either each negotiate separately with Apple to make their cards available on Apple Pay or not at all. It is therefore not clear to the ACCC that NFC access for the Applicants would result in Australian consumers being more likely to adopt mobile payments.”

“The ACCC is not satisfied, on balance, that the likely benefits from the proposed conduct outweigh the likely detriments,” ACCC chairperson Rod Sims said in a statement issued today.

“We are concerned that the proposed conduct is likely to reduce or distort competition in a number of markets.”

“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 said.

The ACCC head said that Apple and Android compete for consumers by “providing distinct business models”. If the banks successfully forced Apple to open up NFC access it would affect Apple’s current integrated hardware-software strategy.

The applicant banks said they were disappointed by the decision.

“This case has always been about consumer choice,” a spokesperson for the group of banks, Lance Blockley, said.

“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 banks were “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.”

“We believe the ACCC’s decision is great for Australians who want the easiest, most secure and private payment experience possible with Apple Pay,” an Apple spokesperson said.

“Today, millions of users from 3,500 banks in 15 markets enjoy using Apple Pay and we look forward to continuing to work with individual banks in Australia and around the world to bring Apple Pay to their customers too.”

The ACCC’s final determination (PDF) is available online.

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