Apple warns of security risks if Aussie banks get cartel approval

Apple Pay in action.

Apple has warned that Australian consumers would be worse off and could face increased security risks if some of Australia’s top banks get their way and form a cartel to dictate Apple Pay terms.

In a submission to the Australian Competition and Consumer Commission (ACCC) dated 26 August, the technology company called on the ACCC to reject a request from major banks to collectively negotiate with Apple.

Such an arrangement would “result in significant consumer harm and perpetuate the oligopolistic banking market conditions described recently by the chair of the Commission,” Apple stated, referring to comments by ACCC chairman, Rod Sims, to the media in early August.

The ACCC, which released Apple’s 21-page submission on 30 August, is in the process of assessing applications by Westpac Banking Corporation, Commonwealth Bank of Australia, National Australia Bank, and Bendigo and Adelaide Bank for authorisation to collectively bargain with Apple and other mobile wallet providers.

If granted, the banks could form a limited cartel to collectively negotiate and boycott activities with the Apple Pay platform, along with other third party wallet providers operating in Australia, including Android Pay and Samsung Pay.

“The Commission should reject the application by four of Australia’s largest banks to jointly negotiate the terms and conditions with third party mobile wallet providers and to institute a joint boycott during those negotiations,” said Apple in its submission.

In particular, Apple has taken exception to the banks’ requests to participate in mobile payment and wallet services because, if permitted, it would give the banks the potential to charge consumer fees for using Apple Pay, gain direct access to the near field communication (NFC) radio in Apple devices, and draft special security guidelines for third-party digital wallets.

Apple suggested that this would lead to less security, less privacy, and less convenience in relation to mobile payments in Australia. It also said the proposed arrangement would result in higher costs for consumers and less mobile payment innovation in the country.

“Apple will not and cannot agree to these terms because they undermine the availability, security, and privacy our customers expect when using Apple devices to make payments,” the company stated in its submission. “Much of the applicant banks’ application relates to their desire to have direct access to the NFC antenna contained in Apple devices.

“This is not open to negotiation with any bank. Apple designs its products to provide very secure experiences, especially where payments are concerned,” it said. “Apple does not provide banks access to the NFC radio because doing so would undermine the security our customers expect when using Apple devices to make payments.”

Meanwhile, Google has also rejected the banks’ call to form a cartel. In a submission dated 23 August, Google Asia Pacific (GAP) suggested that there is no reason why the banks’ proposed collective boycott would be needed for negotiating Android Pay services.

“The applicants and other parties can offer payment or wallet apps on the Android platform because the Android API for NFC is open to all,” it stated in the submission.

Google Asia Pacific also called on the ACCC to confirm that the banks do not intend their requested collective negotiating authorisation to extend to the Google Pay service.

Earlier this month, the ACCC announced it would not grant the banks’ request for an interim authorisation to collectively negotiate with Apple, saying that it would instead continue to review the application.

"The ACCC requires more time to consult and consider the views of industry, consumers, and other interested parties,” said Sims at the time.

While most of Australia’s leading banks have chosen to keep Apple Pay at arm’s length, ANZ has welcomed the platform, becoming the only financial institution locally, along with American Express, to reach an agreement with Apple since it began Apple Pay negotiations in Australia in 2014.

On 30 August, ANZ revealed that it would extend the Apple Pay facility to its Mastercard customers, giving an additional 500,000 of its customers access to the platform. At the same time, the bank has also extended its Android Pay facility to Mastercard customers.

“Apple Pay is a great example of innovation in the payment space,” said Mastercard Australia’s head of Market Development and Innovation, Garry Duursma. “Mastercard was the first in the world to offer contactless payments, and Australians are fast adopters with more than seven out of ten Mastercard transactions now made using contactless technology at over 750,000 terminals across Australia.”