It’s over: Banks lose Apple Pay fight

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ACCC makes final ruling.

Australia’s big banks have lost a hard-fought battle to pressure Apple to open up the NFC in its iPhones.

The decision by the Australian Competition and Consumer Commission (ACCC) to deny the request made by CBA, Westpac, NAB, and Bendigo and Adelaide Bank looked likely last November when the regulator issued its draft decision.

The consumer watchdog today confirmed the banks would not be allowed to band together to bargain with Apple and boycott its Apple Pay platform.

“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 in a statement.

“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.”

The four banks wanted access to the NFC chips in Apple’s iPhones in the same way they access the technology in Android devices so they could offer their own integrated digital wallets to customers.

They also wanted to lobby Apple to drop its restriction on passing on Apple Pay fees to their customers.

Apple argued that providing the NFC access would compromise the device’s security, and claimed the banks were using the push as a smokescreen in an attempt to delay the growth of Apple Pay in Australia and avoid having to pay Apple Pay fees.

Last month the banks narrowed their campaign to focus solely on NFC access in response to Apple’s accusations.

The ACCC today said while opening up access to the iPhone’s NFC chip would lead to increased competition in the mobile payments market, there would equally be distortions and reductions in competition.

“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,” 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.

“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.”

The four banks said they were “disappointed” by the ACCC’s ruling.

“This case has always been about consumer choice. The applicants made this application to seek to ensure they could participate in the future of mobile wallets, and not have the course of development for mobile wallets in Australia dictated by a single overseas corporation,” spokesperson 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.”

ANZ Bank is the only major bank to currently offer its customers Apple Pay. The service is also available to American Express customers and Cuscal’s 31 financial institution partners.

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