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Apple v Aussie banks – what the latest ruling means for NFC payments

Mobile NFC payments are proving to be a hugely popular way of completing low-value transactions when consumers are out shopping. Indeed, one recent study has revealed that the UK, for example, has seen usage of mobile NFC payments increase by 247 percent over the last year.

However, there are still bumps in the road for the industry, and one of these may be how payment providers and hardware manufacturers work together to put the technology in the hands of citizens. And the differing priorities of these firms may cause issues when it comes to giving consumers the options they want.

The issue in Australia

This conflict may be most apparent in Australia, where a coalition of some of the country’s largest banks has been in dispute with Apple over NFC capabilities. Last year, the group asked the Australian Competition and Consumer Commission (ACCC) for permission to act as a group in negotiations with the iPhone maker for access to its Apple Pay technology, in order to secure more favorable fees.

After this was refused, the banks, which include Bendigo and Adelaide Bank, Commonwealth Bank of Australia, National Australia Bank, and Westpac, amended their application to only seek access to the smartphone’s NFC functions. Apple still refused to provide this, arguing that opening up its technology for use by third parties such as financial providers would compromise security.

The ACCC has now issued a final ruling in Apple’s favor, meaning that the banks will not be allowed to negotiate together or collectively boycott Apple Pay.

Why the ACCC sided with Apple

In its submission to the ACCC, the group claimed alternatives such as Android Pay or non-NFC solutions are not practical.

“These alternatives are unrealistic in Australia, which has the world’s highest adoption of contactless NFC card payments and one of the world’s highest iPhone market shares, particularly among customers likely to use mobile payments,” the banks said. They added that presently, “potential mobile wallet providers other than Apple are locked out of the established payment infrastructure in respect of the clear majority of relevant customers”.

However, the ACCC found that while opening up Apple’s NFC technologies to the banks would result “in increased competition, consumer choice, innovation and investment in mobile payment services”, it also raised concerns about the effect it would have on the market as a whole.

In a statement, ACCC chairman Rod Sims said: “The ACCC is not satisfied, on balance, that the likely benefits from the proposed conduct outweigh the likely detriments. We are concerned that the proposed conduct is likely to reduce or distort competition in a number of markets.”

Indeed, Apple Pay does already have a large presence in Australia, with almost 50 banks and credit unions signed up to the service as of March 2017, having accepted Apple’s conditions and fees to use the service.

The impact on competition in NFC payments

The fact that so many financial institutions are able to use Apple’s NFC capabilities in Australia suggests that for consumers, at least, there’s plenty of choice available when it comes to the technology. But for financial institutions, having to accede to the US firm’s fees in order to access this may be less than ideal.

The banks’ failed challenge argued that if they had free access to the hardware, there would be more scope for promotions such as cashback. They explain this would be because by encouraging a customer to use their own mobile wallet rather than Apple’s, an issuer would avoid the Apple Pay transaction fee, and could therefore funnel these savings into better offers for their customers, or development of new mobile innovations.

But the ACCC pointed out that digital wallets and mobile payments are still in their infancy, and are likely to change rapidly in the coming years, so any actions to grant open access to Apple’s technology could “artificially direct the development of emerging markets to the use of the NFC controller in smartphones”, something which could well hamper other innovations that are already occurring around different devices and technologies for mobile payments.

However, Mr Sims also noted: “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.”

Written by Andy Brown

Andy Brown

Andy is marketing director for payments at NCR. He has nearly 30 years' experience in e-payment systems from the delivery and support of systems in the Far East and Europe, from both the product management and marketing perspectives. Based in the UK, Andy is responsible for marketing NCR payment solutions.

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