Aussie banks say no “free ride” for Apple Pay

Three of Australia’s ‘big four’ banks have said that Apple would get a “free ride” on existing infrastructure if they are not allowed to collectively negotiate with the technology giant on the terms of its Apple Pay contactless payments platform.

In a joint submission to the Australian Competition and Consumer Commission (ACCC), the Commonwealth Bank of Australia, National Australia Bank, Westpac, and Bendigo and Adelaide Bank have warned that Apple’s exclusive approach to its Apple Pay rollout in Australia would stifle the use of existing contactless payment infrastructure in Australia.

“Australian card issuers and merchants have already invested heavily in the infrastructure needed to make mobile payments a success,” the submission stated. “In the United States (US), where this investment is yet to be made, the uptake of Apple Pay has been slow. In contrast, the uptake of integrated mobile wallets in Australia could be very fast.

“The applicants want to avoid a situation where Apple is allowed to free ride on this investment for its own benefit, while blocking others from competing with Apple Pay,” it said.

The banks and the technology company have been lobbying the Australian competition watchdog for months in efforts to gain the upper hand in Apple Pay negotiations.

For their part, the banks have been asking for authorisation to collectively negotiate with Apple in order to obtain a stronger position to dictate the terms around the use of Apple Pay.

Apple, on the other hand, has told the ACCC that the bank’s proposal to form what is essentially an authorised cartel to negotiate Apple Pay terms would stifle competition in the sector.

In their latest submission, dated 30 September, the banks say that it is arguing for collective negotiating rights precisely to ensure healthy competition for consumers.

“Apple suggests that the applicants wish to ‘blunt’ or delay Apple Pay and its entry into Australia, and to slow innovation and reduce competition,” the banks stated in their submission, which was prepared by law firm, Gilbert and Tobin.

“This is exactly backwards. The applicants are under intense pressure to participate in Apple Pay, and risk losing customers to other issuers who offer Apple Pay before them,” it said.

In their submission, the banks suggested that collective negotiation is necessary in a context where Apple has the ability and incentive to lock competitors out of the iPhone’s near-field communication (NFC) technology needed to make integrated mobile payments.

“Apple claims its lock-out is to make payments more secure – but Samsung and Google already provide access to this technology without detriment to security,” the submission stated. “The applicants therefore believe it is important to challenge Apple’s claims in an effort to increase competition in mobile wallet payments and to benefit consumers.”

“Apple seeks to determine every aspect of the security arrangements that apply to Apple Pay, although it is the issuers, and not Apple, who will be liable for any fraud.

“And Apple seeks to charge issuers for their customers’ use of Apple Pay but to deny them the choice of passing through any of those costs, with the result that the cost of Apple Pay will be higher than it should be and will be borne by all of a bank’s customers, whether they use Apple Pay or not,” it said.

In late August, Apple said that consumers would be worse off, and face increased security risks, if the banks get their way and form an authorised cartel to negotiate Apple Pay terms.

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 in its own submission to the ACCC, referring to comments by the Commission’s chairman, Rod Sims, to the media earlier this year.

Meanwhile, the one Australian ‘big four’ bank not calling for cartel authorisation, ANZ, is continuing with the Apple Pay partnership it struck earlier this year, with the company announcing in August that it would extend Apple Pay to more than 500,000 ANZ Mastercard customers.