For over a year, Australia's largest banks have been engaged in a quiet war with Apple. Their goal is to force the world's largest technology company to open access to the iPhone's NFC chip and allow collective bargaining over Apple Pay. Apple is fighting back, of course, and the next few weeks and months will determine the future of mobile payments in Australia.
With the ACCC primed to make a draft decision on the situation, the most recent submission from the applicants — a consortium that includes Commonwealth Bank, Westpac, National Australia Bank and Bendigo and Adelaide Bank — squarely discusses the advantages not only to them, but to the wider Australian public, in Apple opening up the iPhone's NFC functionality to developers. Currently, Apple holds exclusive power over the NFC technology in its phones, a distinctly different landscape to the no-holds-barred approach of Android.
Apple's position means that for Australia's banks to offer NFC payments — and many already do using Android Pay and Samsung Pay — through the iPhone, they would need to sign up to Apple Pay, and agree to Apple's merchant fees that it levies on each transaction made using the system. The banks' most recent submission to the ACCC says that if Apple Pay were to "remain the only way for iPhone users to make NFC payments, these prices would... not be subject to any downward pressure".
The issue at the centre of the debate is that the banks want Apple to open up its NFC chip to third-party apps — not for free, they say, "but only on reasonable terms" — so the banks. They believe the process of providing access to NFC would be "a relatively minor task" for Apple, compared to the scale and pace of the company's regular incremental and substantial iOS updates. As it stands, the submission says, "[banks] are under pressure to participate in Apple Pay on sub-optimal and inefficient terms, to avoid losing customers to competitors who offer Apple Pay."
That's already happening, too. The banks' submission cited Twitter conversations on consumers switching banks for the perceived value of Apple Pay, and Gizmodo has written in the past on the appeal of changing banks to gain access to contactless payments via iPhone. The crux of the matter, though, is that Australia's biggest banks say that any alternative — whether it's an NFC-enabled Android payment app, or a NFC sticker from the banks themselves — is not "meaningful competition" for Apple Pay.
Apple has suggested in the past that alternatives are available to the banks that don't want to sign up for Apple Pay, like NFC stickers, Android apps and iOS banking apps that link to Apple Pay but that sit outside of it. The banks don't see those as adequate or effective competition, though, and their proposed solution is that Apple be forced by the ACCC to open up the iPhone's NFC. Withholding that access, they say, "will result in lost opportunities for investment and innovation", and "mobile wallets without access to... NFCC are not viable".
Importantly, the banks say that Android NFC banking apps alone are not enough to encourage Australians to switch to mobile wallets. iPhones account for 40 per cent of smartphones sales in Australia, but are over-represented with 60 per cent of mobile banking and 70 per cent of app revenues. "The average iPhone user," the submission says, "is more likely to adopt... integrated mobile payments. iPhone users tend to be wealthier and likely to conduct more transactions."
Switching away from an iPhone, too, is too hard in the banks' opinion for consumers to see it as a reasonable choice — what the banks call a "difficult, inconvenient and expensive" process is enough to keep iPhone users loyal to Apple, and Android can't be seen as sufficient competition for Apple to retain exclusive use of its NFC chips. "Apple's insistence on exclusive access to NFC... prevents [banks] from making their apps available on multiple platforms — in turn preventing them from reaching the users they need to make continued investment in these apps worthwhile."
With any alternative to Apple's own integrated NFC being "slower and less convenient" — like NFC stickers, which may clash with the iPhone's own NFC if applied to the back of a phone, and that aren't able to communicate directly with any banking apps on the phone, instead relying on payment networks and the internet to eventually report payments through to customers' apps — as well as less secure, with none of the Touch ID fingerprint authentication that Apple Pay relies on to authenticate payments, the banks are pushing hard for the ACCC to decide in their favour and force Apple to open up the iPhone's NFC chip for them to access.
The banks do see advantages outside of their own sector if Apple were to open up NFC for wider developer applications, too. They close their most recent submission saying that open NFC access could lead to significant innovation in iPhone apps outside banking. "Access to the NFC function... could be made available more broadly — beyond the collective bargaining group to retailers, technology startups, transport operators, government services and others — to increase customer choice and innovation." A move like this but it will take the power of the ACCC and the banking collective to strongarm Apple into doing so in Australia. [ACCC]