The Australian competition watchdog has rejected a request by three of Australia’s ‘big four’ banks to collectively negotiate Apple Pay terms with the Californian tech powerhouse.
The Australian Competition and Consumer Commission (ACCC) has issued a draft determination proposing to deny authorisation to the Commonwealth Bank of Australia (CBA), Westpac, National Australia Bank (NAB), and Bendigo and Adelaide Bank to collectively bargain with and boycott Apple on its Apple Pay platform.
The move follows months of lobbying on the part of the banks for permission from the ACCC to essentially form an authorised cartel to negotiate terms on the Apple Pay platform, which gives the iPhone users the ability to use their phones for contactless payments.
In a joint submission to the ACCC, the banks 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 banks had been seeking authorisation to bargain with Apple on two key issues, which included access to the Near-Field Communication (NFC) controller in iPhones.
This would mean the banks could offer their own integrated digital wallets to iPhone customers in competition with Apple’s digital wallet without using Apple Pay.
The banks also wanted to remove restrictions that Apple imposes on banks which preventing them from passing on fees that Apple charges the banks for the use of its digital wallet.
In a prior submission to the ACCC, Apple had warned that Australian consumers would be worse off and could face increased security risks if the banks got their way to form a cartel to dictate Apple Pay terms.
“The Commission should reject the application by four of Australia’s largest banks to jointly negotiate the terms and conditions with third party mobile wallet providers and to institute a joint boycott during those negotiations,” said Apple in its submission.
Despite these conflicting concerns, one of Australia’s largest banks, ANZ, struck out on its own in April to become the first of the country’s top four banks to sign up to Apple Pay. In fact, in August, ANZ revealed that it would extend the Apple Pay facility to its Mastercard customers, giving an additional 500,000 people access to the platform in Australia.
Since ANZ signed up, 31 smaller Australian financial institutions have also joined the Apple Pay platform, with credit card processing company, Cuscal, signing a deal with Apple for the platform in November. The move sees Credit Union Australia, Police Bank, Bank Australia, and others tap into the contactless payment app.
In its draft determination, the ACCC said that it is concerned that the banks’ proposed collective bargaining request could reduce or distort competition in a number of markets.
The competition watchdog suggested that such cartel conduct would reduce the competitive tension between the banks individually negotiating with Apple, which could reduce competition between the banks in the supply of mobile payment services for iPhones.
It also cited potential detriments to competition in digital wallets arising from the proposed conduct.
Authorisation would allow the banks to agree not to sign up to Apple Pay for three years, the ACCC said.
“While the ACCC accepts that the opportunity for the banks to collectively negotiate and boycott would place them in a better bargaining position with Apple, the benefits are currently uncertain and may be limited,” ACCC chairman, Rod Sims, said.
“Digital wallets and mobile payments are in their infancy and subject to rapid change. In Australia, consumers are used to making tap and go payments with payment cards, which provide a very quick and convenient way to pay.
"It is therefore uncertain how competition may develop with the availability of mobile payments and possible future innovations,” he said.
For their part, the banks have indicated that they remain committed to pursuing a "successful outcome that will benefit consumers with greater choice," and foster future innovations in mobile wallets and other near field communications (NFC)-powered functions.
The banks will continue working with the ACCC to address the issues raised in the Commission's draft determination in order to "provide competition and choice for the benefit of consumers".
The banks plan to respond to the draft determination with additional supporting arguments for authorisation.