The Australian Competition and Consumer Commission (ACCC) has issued a draft determination proposing, on balance, to deny authorisation to the Commonwealth Bank of Australia, Westpac Banking Corporation, National Australia Bank, and Bendigo and Adelaide Bank (the banks) to collectively bargain with and boycott Apple on Apple Pay.
The banks sought authorisation to bargain with Apple on two key issues:
- access to the Near-Field Communication (NFC) controller in iPhones; such 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, and
- removing restrictions Apple imposes on banks preventing them from passing on fees that Apple charges the banks for the use of its digital wallet.
The ACCC has said this is “a finely balanced decision”.
The challenge of this case has always been finding some middle ground between Apple’s claim that opening the Apple Pay system to external operators would result in compromising security and the the cost of access to Apple Pay.
It is true that Apple has closed direct access to the NFC radio, Secure Element chip and the supporting infrastructure. But Apple has clearly been happy to negotiate deals with financial institutions, with over 40 banks and other financial companies now offering Apple Pay to customers. A large swathe of them, helpfully for Apple, connected to Apple Pay while the ACCC was deliberating.
My argument has always been that the banks have been free to create their own digital wallet solutions for many years. However, they have been unwilling or unable to make that investment. Now that Apple has done the hard work, they want to ride on those coat-tails.
The banks’ argument was based on these four public benefits.
- increased competition and consumer choice in digital wallets in Australia
- increased innovation and investment in digital wallets and other mobile applications using NFC technology
- greater consumer confidence leading to increased adoption of mobile payment technology in Australia, and
- increased pricing efficiency in digital wallets.
But, 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 broader benefits to the community are “currently uncertain and may be limited”.
ACCC chairman Rod Sims says, “However, banks can already offer competing digital wallets on iPhones without direct access to NFC, through their own apps using Apple Pay payment technology, or using NFC tags. Banks can also offer digital wallets on the Android platform.”
There may also be detriments to competition in digital wallets arising from the proposed conduct. Authorisation would allow the banks to agree not to sign up to Apple Pay for three years. This is a significant period of uncertainty and would result in decreased choice for consumers whose banks engage in this conduct.
The ACCC also considered whether this decision could impact competition between mobile operating systems. The differences between Apple Pay and Android Pay gives banks and consumers choice as they deliver payment solutions differently.
The ACCC is seeking submissions on its draft determination before making a final decision