Apple Pay reignites feud with big banks

The world’s largest company Apple has warned three of Australia’s biggest banks that they will fall into irrelevance if they fail to make peace with Apple Pay. 

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In an acid interview with the AFR, Apple Pay vice president Jennifer Bailey said that customers loved Apple Pay so much that they were willing to change banks in order to use it. ANZ, the only big four bank to have partnered with Apple Pay, was excluded from Ms Bailey’s criticism. 

The strident critique from Ms Bailey follows the Commonwealth Bank, Westpac and NAB’s application to the Australian Competition and Consumer Commission, the competition regulator, for permission to bargain with Apple collectively. The large banks are prohibited from collective bargaining under Australian competition laws and have accordingly applied for an exemption. 

Their appeal to the ACCC is driven by Apple’s refusal to make exceptions for Australian banks, who have expressed dismay over the terms of use put forward by Apple Pay. In particular, it is in retaliation for Apple’s blocking digital wallet providers access to the iPhone’s near field communication (NFC) hardware. This is done, the banks argue, to give a monopoly to its own provider Apple Pay. 

"This is about providing Australians with real choice and better outcomes," a spokesperson for the banks told the The Sydney Morning Herald. 

"If successful, the application would have tremendous benefits for the entire Australian mobile payments landscape including for public transport fares, airlines, ticketing, store loyalty and rewards programs and many more applications yet to be developed."

For its part, Apple has steadfastly refused to deal with Australian banks on different terms to which it has dealt with other global banks, preferring a one-size-fits-all approach and wholesale block on NFC access. The company has been scathing of Australian banks for attempting to break their mould, claiming their special pleading will block innovation and risk the iPhone’s security. 

"Apple upholds very high security standards for our customers when they use Apple devices to make payments. Providing simple access to the NFC antenna by banking applications would fundamentally diminish the high level of security Apple aims to have on our devices,” Ms Bailey said. 

No evidence to support the alleged security threat was provided. Other smartphone providers, such as Android, have allowed banks access to their NFC systems without encountering security threats. 

Apple Pay is a mobile app that allows cardless, PIN-free payments. With a simple wave of a phone at a terminal, payment can be made. According to Apple, the number of users tripled last year.

At stake for the banks is millions of dollars in credit card revenue. But - and perhaps more significantly - their role in public life. Banks have long guarded their relationships with customers at the point of sale. By handing the keys to the castle over to giant tech companies, big banks fear reduced visibility and being demoted to providers of a mere utility. 

For Apple, a more likely source of concern than the publicly stated reasons about security is that ceding ground to Australian banks would set precedent elsewhere. There are already audible rumblings in South Korea, calling for Apple Pay to change its terms.

The debate achieved relevance for Australian fintech last year when the peak industry group FinTech Australia interposed itself, arguing that the issue highlights the need for open financial infrastructure for everyone. Though some fintechs, such as Tyro, have outrightly backed the banks most have stayed uninvolved, preferring to operate through the lobby group. 

FinTech Australia has sided with the banks in opposing Apple, but have taken stock of the banks’ hypocrisy. while arguing for open infrastructure with Apple, big banks are arguing against open data infrastructure with fintech.

“Consumers should have the right to access their money, and instruct institutions to transfer that money, using the device or mechanism of their choice, to the third party of their choice. Equally, consumers should also have the right to access their data, and instruct institutions to share their data, with the third party of their choice,” FinTech Australia told the ACCC, a jab at both Apple Pay and the banks. 

The ACCC’s final ruling is expected next month. 

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