The Australian Competition and Consumer Commission has decided against allowing the Commonwealth Bank of Australia, Westpac Banking Corporation, National Australia Bank, and Bendigo and Adelaide Bank to collectively bargain with Apple - and to collectively boycott Apple Pay.
While Bendigo and Adelaide Bank, Commonwealth Bank of Australia, National Australia Bank, and Westpac have been pushing for the Australian Competition and Consumer Commission (ACCC) to allow the banks to negotiate as a group for access to Apple Pay, and now just the Near Field Communication (NFC) function on iPhones, Macquarie Bank and ING Direct customers will now have access to Apple Pay.
"The ACCC is not satisfied, on balance, that the likely benefits from the proposed conduct outweigh the likely detriments. We are concerned that the proposed conduct is likely to reduce or distort competition in a number of markets," ACCC Chairman Rod Sims said.
The banks sought authorisation to bargain with Apple for access to the Near-Field Communication (NFC) controller in iPhones, and "reasonable access terms" to the App Store. This access would enable the banks to offer their own integrated digital wallets to iPhone customers in competition with Apple's digital wallet, without using Apple Pay.
"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 would be outweighed by detriments," Mr Sims said.
The banks argued that access to the NFC controller on iPhones would enable them to offer competing wallets on the iOS platform. The banks said the benefits of this would include "increased competition and consumer choice in digital wallets and mobile payments in Australia, increased innovation and investment in digital wallets and other mobile applications using NFC technology and greater consumer confidence leading to increased adoption of mobile payment technology in Australia".
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.
The ACCC accepted that Apple providing the banks access to the iPhone NFC controller is likely to lead to increased competition in mobile payment services and that this was a significant public benefit. But the ACCC considered the "likely distortions to and reductions in competition" caused by the conduct would also be significant.
"First, Apple and Android compete for consumers providing distinct business models. If the Applicants are successful in obtaining NFC access, this would affect Apple's current integrated hardware-software strategy for mobile payments and operating systems more generally, thereby impacting how Apple competes with Google," Mr Sims said.
"Second, 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. There is also a range of alternative devices being released that allow mobile payments; for example, using a smartwatch or fitness device. It is therefore uncertain how competition may develop."
Sims said that access to the NFC in iPhones for the banks could artificially direct the development of emerging markets to the use of the NFC controller in smartphones.
"This is likely to hamper the innovations that are currently occurring around different devices and technologies for mobile payments," Mr Sims said, pointing out that it would also be likely to reduce the competitive tension between the banks in the supply of payment cards.
"Finally, Apple Wallet and other multi-issuer digital wallets could increase competition between the banks by making it easier for consumers to switch between card providers and limiting any 'lock in' effect bank digital wallets may cause," Mr Sims said.
The ACCC consulted with consumers, financial institutions, retailers and technology companies in reaching its decision.
One year after its launch in Australia with American Express as a partner and with ANZ Bank eventually joining up too, Apple Pay looks like it's starting to hit its stride in Australia. Here's every bank that supports the cardless payment app for iPhone and Apple Watch.