Is Apple getting a ‘free ride’ on Aussie payment infrastructure?
There was a much circulated photograph last week of Apple’s CEO Tim Cook riding on the Japanese subway system in a press campaign to kick off the Apple Pay launch in Japan. He rode the subway and expounded on the Japanese love of all things mobile while throwing in a nod to Sony’s FeliCa NFC technology. Apple is customising their new iPhone 7 and iPhone 7 Plus and the second generation Apple Watch with this very specific NFC tech, allowing for Apple Pay transactions in-store, in-app and online as well as for transport.
Cook also waxed lyrical on the removal of cash from society, “We'd like to be a catalyst for taking cash out of the system,” Cook said. “We don’t think the consumer particularly likes cash." Adding that consumers aren’t too keen on physical currency, and that they'd much rather use cashless services such as Apple Pay. “We're incredibly excited to bring iPhone 7 to customers in Japan so they can experience the magic of Apple Pay.” He continued “Apple Pay will transform your daily routine, from making your commute easier and more convenient than ever with Suica [the contactless smart card used to pay train fares in Japan - hence the need for FeliCa NFC] right on your iPhone 7 and Apple Watch Series 2, to using your favourite cards to make secure and private purchases with a single touch."
The Japanese must have loved that. The Aussies not so much, and therein (still) lies a problem.
A group of Australian banks and the technology company have been lobbying the Australian competition watchdog for months in efforts to gain the upper hand in Apple Pay negotiations. For their part, the banks have been asking for authorisation to collectively negotiate with Apple in order to obtain a stronger position to dictate the terms around the use of Apple Pay. Three of Australia’s ‘big four’ banks have said that Apple would get a “free ride” on existing infrastructure if they are not allowed to collectively negotiate with the technology giant on the terms of its Apple Pay contactless payments platform.
In a joint submission to the Australian Competition and Consumer Commission (ACCC), the Commonwealth Bank of Australia, National Australia Bank, Westpac, and Bendigo and Adelaide Bank have warned that Apple’s exclusive approach to its Apple Pay rollout in Australia would stifle the use of existing contactless payment infrastructure in Australia. “Australian card issuers and merchants have already invested heavily in the infrastructure needed to make mobile payments a success,” the submission stated. “In the United States (US), where this investment is yet to be made, the uptake of Apple Pay has been slow. In contrast, the uptake of integrated mobile wallets in Australia could be very fast. “The applicants want to avoid a situation where Apple is allowed to free ride on this investment for its own benefit, while blocking others from competing with Apple Pay,” the submission said.
This negotiation is worth a lot to the banks, the banks claim Apple has approximately 40% of the smartphone market in Australia. The banks dismiss Apple’s claim that opening up access to the NFC function would undermine the security of mobile wallets. The banks point to the experience of Apple in China and recently Japan, as I wrote about only two paragraphs ago, where Apple Pay modified its demands in order to maintain parity with Samsung Pay or other local payment standards. Besides seeking non-exclusive access to the NFC and standardised security for all mobile payment systems, the four banks want price transparency on transaction costs for mobile payments within Australia.
“Apple suggests the applicants wish to blunt or delay Apple Pay and its entry into Australia, and to slow innovation and reduce competition,” the banks continue in their submission. “This is exactly backwards. The applicants are under intense pressure to participate in Apple Pay and risk losing customers to other issuers who offer Apple Pay before them. They wish to commence and conclude collective negotiations and offer Apple Pay to their customers as quickly as possible.”
“Our application remains focused on providing Australian consumers with real choice and better outcomes for mobile payments, mobile wallets and a range of other potentially NFC-powered functions such as public transport, airlines, store loyalty and rewards programs, and many more applications yet to be developed,” says Lance Blockley, a spokesperson on behalf of the four banks.
“This is about the future of mobile payments in Australia — will it be Apple’s way or no way, or a genuine level playing field so all consumers can have the best digital services, no matter what device they own.”
The four banks have received support for their bid to negotiate collectively with Apple from a number of card schemes, merchants, other banks and payment associations. The ACCC is expected to give its decision on their claim in November 2016.
So while travellers may use Apple Pay to ride the rails in Japan - it may take a little longer for their Australian cousins to do the same thing. Roll on November.
(We’re taking a break next week - normal service will resume on Monday 7th November)
Steve Atkins
Contactless Intelligence
