With Australian Mobile Payments Decision Apple Sends Warning To Banks

As an Australian regulator barred lenders from bargaining collectively for access, Apple Inc. on Friday won a victory in its global fight to prevent banks from introducing their own mobile payment services on Apple devices.

Introducing their own mobile applications on iPhones and Apple Watches that could be used for contactless payments instead of the Apple Wallet has been barred by the decision by Australia’s competition watchdog, the first of its kind.

Potentially unlocking more of Australia’s contactless payment market valued at an estimated $84 billion a year, the banks had hoped to circumvent transaction fees and get customers to engage more frequently with their own apps.

“It will have global implications,” Australian Competition and Consumer Commission Chairman (ACCC) Rod Sims said after the ruling came down.

“If others need to think it through … weve at least got something out there which they can kick off from.”

The banks would have been given them more negotiating power and could have sparked similar appeals to regulators for access to Apple’s systems in other jurisdictions around the world it there was a win by four of the largest Australian banks involved in the case, which command two-thirds of the nation’s credit card market.

Access to the near-field communication (NFC) technology behind its payment system is ot allowed by Apple in any of its 3,500 bank partners in 15 global markets.

By forcing Apple to act more like Alphabet Inc, whose Google arm owns the more open Android operating system that allows contactless payments from individual apps, could reduce competition by giving the banks bargaining power, the Australian regulator said.

“(Apple and Android) are very different offerings and they have different implications for ease of use, security and customer experience,” Sims said.

“It is a tricky issue for a competition regulator to force one competitor to adopt a strategy of the other competitor.”

For Australians who wanted the “easiest, most secure and private payment experience possible with Apple Pay”, it was a great decision, an Apple spokeswoman said.

The banks that are yet to allow use of their cards with Apple Pay, which was introduced to the country last year include Commonwealth Bank of Australia (CBA) , Westpac Banking Corp, National Australia Bank Ltd (NAB) and Bendigo & Adelaide Bank Ltd.

Although to date more transactions are with contactless cards than mobile phones, the Australian “tap and go” market was estimated at A$110 billion ($84.32 billion) a year and growing by payments consultant MWE Consulting last year.

They would now review their strategies regarding Apple Pay individually, said Lance Blockley, a payments expert representing the four banks involved in the Australian ruling.

“I suspect Apple will want to talk about Apple Pay rather than NFC access,” he said, referring to any future negotiations.

While CBA and NAB declined to comment and Bendigo and Adelaide Bank could not be reached immediately for comment, a Westpac spokeswoman said the bank remained open to introducing Apple Pay.

The four banks that battled Apple might now pay a financial price for doing so in the form of higher fees for using Apple Pay, said Steve Worthington, a business professor at Melbourne’s Swinburne University of Technology.

“If you were in Apples shoes what would you do?,” he said. “Would you give them the same deal (as the early adopters) or would you punish them by trying to make it more favorable to Apple?”

(Adapted from CNBC)


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