There has been much written about the Australian banks pushing Apple Pay to loosen its grip on the technology that enables mobile payments. The result could bode well for US banks as they look to re-up agreements with Apple.
Apple has maintained tight control over Apple Pay since its October 2014 launch,
forcing participating US banks to pay a toll of 10 to 15 basis points per transaction to access the near-field communication antenna, or controller, according to industry sources. Banks grumbled, but they paid up – according to an article in the American Banker.
Many of the contracts US banks initially signed to support Apple Pay are coming up for renewal, and financial institutions hoping to renegotiate terms are closely watching the Australia situation for signs of a thaw in Apple’s policy of blocking third-party access to its mobile payments solution.
“Some believe Apple has been courting conflict with the payments industry by acting monopolistically in the way it restricts access to its NFC controller, and Australia is turning out to be the most public of these collisions,” said Doug Parr, chief revenue officer at Prairie Cloudware, a software developer based in Omaha, Neb.
Apple declined to discuss the matter and US banks continue to be tight-lipped about their arrangements with the tech company.
But the issues are stirring up familiar tensions surrounding the tug of war over who ultimately controls mobile payments — banks, device makers or merchants — and it’s too early to predict a winner, Parr says.
So far NFC has emerged as the dominant channel for mobile wallets, because of its smooth user experience and the security it offers when combined with tokenization from payment networks like Visa and Mastercard. Plus, it’s minimally invasive to merchants by riding on existing payment infrastructure rails, Parr pointed out.
But merchants like Walmart are developing their own apps using alternative approaches like QR codes, and because consumers still have not broadly embraced NFC-based wallets, the future direction of mobile payments isn’t certain.
“At some point, consumers will vote with their feet, but the parties supporting mobile payments will need to cooperate, and that’s what’s at the heart of the goings-on in Australia,” Parr said.
Australia’s largest banks recently applied to the Australian Competition and Consumer Commission to fast-track a request for permission to collectively negotiate with Apple, claiming the company’s restrictive policy around Apple Pay is stifling mobile payments innovation in the country.
The Australian Retailers Association pledged support for the banks’ request, along with the Australian Payments Clearing Association.
On Aug. 18 the regulator responded that it needed time to consult with parties and said it would issue a draft decision on the matter in October.
US banks are closely watching the outcome, Parr said, because it could provide clues to how much leverage Apple can exert over banks in various markets.