Banks lose to Apple Pay in competition stoush

Well it’s official. The Australian Competition and Consumer Commission (ACCC) has finally determined that the “banks” (CBA, Westpac, National and Bendigo &¬†Adelaide Bank) are not allowed to collectively negotiate with Apple for access to the NFC chip on iPhones and corresponding access to the App Store.

Although the ACCC agreed that access would in some cases lead to increase competition, it felt that it would have the opposite effect in other cases and may even lead to market “distortions”. The announcement cites 3 main detriments:

  1. Access would alter Apple’s NFC business strategy which could distort the normal market tension between Apple and Google’s Android Pay.
  2. Access could lead to unintended effects or consequences at a time when mobile wallets and digital payments are evolving rapidly.
  3. Access could actually increase the banks’ local market dominance which would reinforce reduced competition and therefore consumer choice.

Naturally the banks decry the decision and say that Apple Pay is a beachhead for dominating the NFC chip for other applications such as loyalty, ticketing, transport and identification. Conversely, Apple says that 3,500 banks in 15 countries are happy to work with Apple Pay in the same manner that ANZ has (ie. by individually negotiating commercial access).

Who’s right?

Time will tell, but in all likelihood this drama is white noise against a backdrop of ongoing innovation in the mobile and digital payments space. The banks will get back to negotiating with Apple Pay for access and wearing the fees that Apple wants to charge, and rolling out their own mobile wallets on Android in parallel. Apple iPhone consumers will probably accept the higher charges imposed by their card issuers resulting from Apple Pay. Android users will use the proprietary wallets deployed by their card issuers and won’t care about the Apple Pay issue. As functionality and user experience improve, consumers and the best innovators will be the winners.

And that is how it has always been, and always will when it comes to payments innovation!