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Apple Gets Win Against Australia Banks Over Mobile Payments

29 November 2016
Apple Inc. scored a victory in the global battle to control the future of mobile payment technology after the Australian competition regulator refused to grant a group of local banks permission to negotiate collectively over the introduction of Apple Pay.

The Australian Competition and Consumer Commission said on Tuesday in a draft ruling it was "not satisfied" that the likely benefits from allowing the banks to negotiate with Apple as a bloc outweighed the negatives. Allowing collective negotiations “could reduce competition between the banks in the supply of mobile payment services for iPhones,” the regulator said.

Australian banks had been seeking to strengthen their negotiating position in talks with Apple amid concerns that it the widespread use of contactless payment cards in Australia will allow the U.S. company to quickly grab a large share of the mobile payments market.

Apple’s technology bars any app apart from its own from using the functionality of the iPhone’s near-field communications antenna, the technology which makes payments on contactless readers possible. It wants banks to permit customers to upload their credit cards into its proprietary digital wallet.

Commonwealth Bank of Australia, National Bank of Australia Ltd., Westpac Banking Corp. and Bendigo & Adelaide Bank Ltd. had applied to the ACCC for the right to negotiate as a bloc with the iPhone maker, citing a “significant disparity in bargaining power.”

Mobile Wallets

With the country’s largest transport network set to start trials of a system where passengers can pay with mobile wallets, and government agencies starting to introduce digital versions of concession cards, the banks expect mobile wallet adoption to surge. Having invested heavily in recent years in their own mobile apps and point of sales technology, they are concerned about the prospect of being locked out of a growth market by third-party offerings.

An Apple spokesman welcomed the ACCC decision. "We believe today’s draft decision is great for Australians and we look forward to continuing to work with individual banks in Australia and around the world to bring Apple Pay to their customers,” the spokesman said.

In their submissions to the regulator, the consortium warned that the rapid adoption of mobile wallets in Australia meant that it was “increasingly likely” that without authorization to negotiate collectively, individual issuers would be “forced to accept terms and conditions that will limit competition, innovation and investment, efficiency and transparency in mobile wallets and mobile payments.”

Australia and New Zealand Banking Corp. isn’t a party to the ACCC action, having decided in April to accept Apple Pay. The decision helped ANZ boost the number of new customers to an all-time high in the quarter ended Sept. 30, CEO Shayne Elliott said on an analyst call earlier this month.

ANZ Gains

“Early experience shows that mobile wallets appeal disproportionally to high income, young professionals and that we are already witnessing a higher propensity for them to acquire other products at ANZ,” Elliott said.

The consortium of banks said they would continue to fight for the right to negotiate collectively with Apple, ahead of a final ruling from the ACCC expected in March 2017.

"If the draft determination of the Australian competition regulator stands, effectively there will be no competition against Apple for mobile payments on the iPhone,” said Lance Blockley, a senior adviser with financial advisory firm Novanta who is acting as a spokesman for the applicant banks.

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