The group of Australian banks seeking stronger negotiating powers with Apple over the NFC technology within its iPhone handsets have been denied access to it by the Australian Competition and Consumer Commission (ACCC) on the grounds that the proposed conduct would “reduce or distort competition in a number of markets” and that the benefits are “outweighed by the detriments”.
Commonwealth Bank of Australia, Westpac Bank, National Australia Bank and Bendigo and Adelaide Bank began their campaign to encourage Apple to open access to the NFC technology within its handsets in July 2016. The banks say they are “disappointed” with the ACCC’s ruling and will now “individually review and determine their future strategy for mobile wallets and mobile payments in order to best serve their customers”.
In its final determination, the ACCC outlines the key points behind its ruling:
- Digital wallets and mobile payments are in their infancy and therefore subject to rapid change;
- Access to the NFC in iPhones could “hamper innovations” that are currently occurring around different devices and technologies;
- It would impact how Apple competes with Google over mobile payments;
- Apple Wallet and other multi-issuer digital wallets could increase competition between the banks by making it easier for consumers to switch between card providers;
- There are options for issuers to bypass Apple Pay and introduce NFC mobile payments for iPhones by using external NFC hardware such as NFC tags.
“However, the ACCC accepts the applicants’ submission that there are disadvantages in not using the in-built NFC controller on Apple devices,” the document says. “In addition, the ACCC recognises the importance of NFC technologies in the Australian payments landscape, which may limit the scope for alternative technologies, such as QR codes, to be adopted as a possible competitive response.”
“The ACCC is not satisfied, on balance, that the likely benefits from the proposed conduct outweigh the likely detriments,” says ACCC chairman Rod Sims. “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 determinants.”
Distinct business models
“First, Apple and Android compete for consumers providing distinct business models,” Sims continues. “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.
“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,” Sims adds. “This is likely to hamper the innovations that are currently occurring around different devices and technologies for mobile payments.
“Finally, Apple 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 ‘lock in’ effect bank digital wallets may cause.”
“This case has always been about consumer choice,” says payments specialist and spokesperson for the banks Lance Blockley. “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.
“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.
“We are 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.”
“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,” Blockley adds. “This, in our view, is aimed at increasing the services revenue they can earn from iPhone users.”
- 15 March 2017: Australian banks brand non-NFC alternatives to Apple Pay ‘unrealistic’
- 13 February 2017: Australian banks drop Apple Pay fee request to focus on iPhone NFC access
- 10 February 2017: Australia’s retailers join the banks in their battle with Apple Pay
- 10 February 2017: Apple Pay boss Jennifer Bailey says she believes Australians will be “happy to switch banks” in order to use Apple Pay
- 10 February 2017: ING Direct and Macquarie Bank sign up for Apple Pay
- 6 February 2017: Apple accuses Australian banks of Apple Pay transaction fee ‘trojan horse’
- 29 November 2016: The ACCC denies authorisation to Australian banks over Apple Pay negotiation in a draft determination
- 17 October 2016: In an extensive response to the ACCC, the banks criticise Apple’s decision to restrict access to the NFC within its handsets, calling it “completely baseless”
- 31 August 2016: Apple insists that allowing access to the NFC technology within its handsets was not open to negotiation with any bank
- 30 August 2016: Supermarket giant Coles puts its backing behind the banks with its own submission to the ACCC
- 22 August 2016: The ACCC rules that it will not grant the banks interim authorization to collectively negotiate
- 10 August 2016: Apple speaks out for the first time about the banks’ submission, saying it was made up of “factual and legal misstatements”
- 27 July 2016: Bendigo and Adelaide Bank, Commonwealth Bank of Australia, National Australia Bank and Westpac Bank submit their request for negotiation to the ACCC