Banks Refused Permission To Collectively Bargain with Apple Over Digital Wallet Technology
Monday 1 May 2017 @ 11.36 a.m. | Trade & Commerce
The ACCC has issued a “Final Determination” denying a group of Australian banks permission to collectively bargain with Apple and collectively boycott Apple Pay. The decision was issued on 31 March 2017, and had been foreshadowed in a ACCC press release issued in November 2016 that stated that the ACCC was “not currently satisfied that the likely benefits from the proposed conduct outweigh the likely detriments.” For more information on the media release and background to the application, see TimeBase’s earlier article.
Participants in the action include Bendigo Bank, the Commonwealth Bank, the National Australia Bank and Westpac. The banks sought permission to bargain together with Apple for access to the NFC (“near-field communication”) technology in the iPhone, in order to develop their own digital wallets to customers that could compete with Apple’s own Apple Pay system.
Currently, ANZ is the only major Australian bank to have made arrangements with Apple to use Apple Pay.
The ACCC Decision
In a media release, ACCC Chairman Rod Sims 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 would be outweighed by detriments.”
While the ACCC acknowledged that competition in mobile payment services was a “significant public benefit”, Mr Sims listed three detriments that they were particularly concerned about:
“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…
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. 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…
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.”
Banks’ Reaction
The banks involved in the decision released a media statement that said they would “individually review and determine their future strategy for mobile wallets and mobile payments in order to best serve their customers.”
Spokeperson Lance Blockley said:
“Whilst we thank the ACCC for their time and diligence in reviewing our application, and recognising both the imbalance in negotiating positions and that there were real issues for consideration, we are disappointed that the finely balanced draft determination was not tipped in the final decision, given our considerable effort to demonstrate the public benefits inherent in open NFC access, and the subsequent flow on benefits for mobile wallet innovation and competition in Australia..
Apple has a stated desire to own the entire mobile wallet, and will use the beachhead into mobile wallets afforded to them by complete control over mobile payments on iPhone to exert control over the rest of the digital wallet. This in our view is aimed at increasing the services revenue they can earn from iPhone users.”
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