Apple says it will allow banks to offer payments directly from their customers’ iPhones without the use of its Apple Pay platform, ending a years-long stoush to force the technology giant to open its devices to other financial services players.
But the country’s major banks are cautious about the decision, and say they will have to see the details of what Apple is proposing to do before they can assess if the battle is over.
Apple Pay, which is the only payment platform on iPhones, has become a lightning rod for discontent among banks and their chief executives. Banks have long worried that the tech firm will encroach on their lucrative payments businesses.
In a decision seemingly forced by a European antitrust deal in July, Apple said access to the tap-and-go payment functionality would be made available to developers – including banks – when it next upgrades the iPhone’s operating system.
However, companies will need to enter into commercial agreements with Apple and pay it undisclosed fees.
Australia’s banks have been lobbying – since the start of mobile payments – for Apple to be forced to open up access to its devices. Apple has argued that it could create security problems – and limited the ability of apps made by banks to make tap-and-go payments.
Apple’s concession came after the company agreed in July to make the change in the European Union in an attempt to resolve an antitrust case and avoid heavy fines.
Westpac chief executive Peter King said the decision was positive and could lead to more competition and choice for customers.
He pointed to recent payment agreements with Apple as a sign that it could work with the tech giant, but said unannounced details about the proposed iPhone changes would determine how much things changed with its apps.
“Westpac’s app is already rated the best banking app in Australia, but we’ll assess the announcement from Apple to determine what it means for the digital payments landscape,” Mr King said. “Ultimately, the take-up will be driven by the commercial terms offered by Apple to access the chip.”
Strained relations
The relationship between the banks and Apple has been strained for years over the issue, with Commonwealth Bank chief executive Matt Comyn repeatedly demanding regulators rein in the California-headquartered company’s market power.
He has previously called for parliament to regulate Apple’s growth in payments and accused it of free-riding on banks’ infrastructure investment. Mr Comyn declined to comment on Apple’s decision while CBA awaits details of the change.
Apple has responded to changes in payments rules in Europe by simply changing the way it charges fees to make the same amount of money – and CBA is suspicious that it will get a raw deal. In March, Mr Comyn told The Australian Financial Review Business Summit that Apple was the “undisputed world champion of kabuki theatre”.
While Apple has only been forced to open up access to its phones in Europe, the banking sector expected this to have led to regulators making similar demands here.
In 2017 CBA, Westpac, National Australia Bank, and Bendigo and Adelaide Bank were unsuccessful in asking the Australian Competition and Consumer Commission to let them collectively negotiate with Apple over access to iPhone tap-and-go payments.
ANZ was not involved in that ACCC push as it was the first of the big banks to fall in line with Apple. It started offering Apple Pay in 2016.
“The most practical application here is further innovation in payments. You could, for instance, have a system that allows you to tap phones to transfer funds between bank accounts,” Rehan D’Almeida, the chief executive of FinTech Australia, a lobby group, said.
“As an industry, we need more time to dig into the details as to how this would work … [In Europe], preferences for Apple applications and pricing barriers limited its uptake.”
Non-bank benefits
Apple’s changes will also have implications for iPhone use outside of payment. It means iPhones can now be used more freely – like Android phones – for other applications. Apple cited examples like car keys, corporate access badges, home and hotel keys, merchant loyalty and rewards cards, event tickets and government IDs.
“It theoretically could allow for digital car keys for our cars. Car key loss is an issue for our business,” Des Hang, the chief executive of car subscription firm Carbar, said.
“The challenge here is how it’s administered by automakers. They would need to create the functionality. Tesla, for instance, already has this, [but] they use Bluetooth.”