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Apple Battles Australian Banks over Access to Apple Pay Platform

Last Updated March 4, 2021 4:50 PM
Lester Coleman
Last Updated March 4, 2021 4:50 PM

Apple Inc. is battling with five of Australia’s banks that are seeking to negotiate collectively with Apple for access to its mobile payment technology. Over the last several months, the banks have complained Apple is not permitting access to mobile payment technology.

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Commonwealth Bank of Austrailia, National Australia Bank, Westpac Banking Corporation, Adelaide Bank and Bendigo have applied to the Australian Competition and Consumer Commission (ACCC) seeking approval for collective bargaining in negotiating with Apple.

Apple Responds To Banks

In a submission  to the ACCC, Apple gave reasons why the ACCC shouldn’t enable the banks to collude. It said a cartel would give the biggest banks more of the financial market.

Apple said it does not restrict its partners from developing their own iOS apps. It said every major Australian bank has an iOS banking app and that two provide mobile payment wallets on iOS and other platforms.

Negotiations Attempted

Apple said it has tried but failed to negotiate terms with each of the applicant banks except one, which has not been willing to sign a confidentiality agreement. Apple said it cannot offer Apple Pay to the banks’ customers without the banks agreeing to terms with Apple.

Because the banks have resisted engaging with Apple for the past two years, collectively negotiating will further entrench the banks’ position by ensuring that all of them can only advance in lockstep with the slowest, least willing member, Apple argued.

The banks would know they can hold out without the threat that one of their competitors will introduce Apple Pay for their customers. This competitive dynamic, which the banks want to avoid, would benefit Australian consumers, Apple claimed.

Apple Fights Banks’ Request

If the Commission permits the banks to negotiate with Apple as a collective group, the banks will not agree to offer Apple Pay unless: 1) Apple permits the banks to charge consumers fees for using Apple Pay; 2) Apple offers direct access to its NFC radio; and 3) Apple agrees to “security” guidelines drafted by the applicant banks that apply only to third-party wallets and not the applicant banks’ mobile payment apps.

Apple said it cannot agree to the terms since they undermine the availability, privacy and security customers expect when using Apple devices.

The only effect that the collective bargaining could have is to further delay or undermine Apple Pay’s expansion in Australia, Apple noted. This will stifle new competition in digital presentment methods and retail banking services by stifling the incentive for existing players to develop new solutions that compete with Apple Pay.

The fact that the banks have requested a three-year period of authorization suggests that they are mainly focused on creating barriers for Apple Pay and other third-party wallet providers.

Banks’ Claims Disputed

Apple does not believe the banks can substantiate any public benefits that they say could arise from the “boycott.”

Australian consumers will benefit from the evolution of new technologies, as well as the introduction of further innovations by the banks which piggyback off the benefits already available through Apple Pay and other digital wallet solutions.

Apple Sees Promising Future

Apple anticipates that, absent collective negotiations, Apple and some individual banks not currently offering Apple Pay are likely to reach agreements to bring it to their customers. Many of these banks would also offer their own mobile wallet solutions through iOS and other platforms.

This, in turn, will lead to further innovation, not only among third-party wallet providers, but among the banks themselves as they develop new and better offerings utilizing Apple Pay or other mobile wallet technologies.

Apple argued its desire to protect its own proprietary hardware is not anticompetitive.

What the banks are seeking is the right to impose a collective boycott to pressure Apple to grant them access to proprietary hardware and software.

Apple has invested significant resources developing a convenient mobile wallet with the highest available security and privacy protections. It is on this basis that Apple seeks to differentiate its mobile wallet from those offered by other providers.

Mandating access to a third party’s technology is not recognized under Australian competition law, Apple noted.

Apple Not Anticompetitive

Apple’s desire to protect the integrity of its own proprietary hardware installed within its own devices is not anticompetitive. It is not “exclusive dealing” conduct to which Australian competition law applies.

Apple claims allowing the banks to control the standards for third-party wallets would, ironically, weaken security and increase fraud costs for merchants compared to what is being achieved through Apple’s and other third-party wallet providers’ solutions.

Also read: Australian banks cleared of colluding against bitcoin companies

Banks Probed On Bitcoin

The Commission cleared Australian banks of colluding to deny banking services to local bitcoin companies in the country, CCN.com reported.

An investigation requested by Senator Matthew Canavan suggesting the ACCC should look into the possibility of banks colluding together to close the bank accounts of bitcoin companies resulted in the regulator concluding that the banks did no wrong.

The Australian Financial Review previously reported that 17 bitcoin companies in Australia received letters from banks saying they planned to close their accounts.

Images from Shutterstock and ACCC.