Concerns found about Apple NFC restrictions but not enough for new regulation

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Campbell Kwan

By

Campbell Kwan

| October 28, 2021

| Topic: Finance

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Image: Getty Images

An Australian parliamentary joint committee has expressed concern regarding Apple’s business practice of only allowing the NFC chip within its devices to be used for Apply Pay, but the committee did not find this to warrant a recommendation for regulatory intervention.

In Australia, banks must pay fees to Apple to use Apple Pay. Other competitors in the mobile payment and digital wallets space, such as Google, do not charge a fee for the use of its Google Pay payments platform.

“The committee notes the imbalance in bargaining power between payment platform providers and other participants in the payments ecosystem. Nevertheless, the observation that the market power of digital wallet platforms, such as Apple Pay and Google Pay, is causing banks to be price-takers may not automatically trigger the need for regulation,” the committee said.

“Such situations are common in modern capitalist economies like Australia and within the payments system, specifically … the case for regulating the market power of digital wallet platforms would need to establish why that is different or is creating more problems than other situations of market power in the payments system.”

The committee’s stance regarding Apple’s third-party NFC chip block was detailed in the committee’s findings [PDF] for its inquiry into the country’s mobile payment and digital wallets, which wrapped up on Thursday following the report’s release.

Rather than make a recommendation for regulatory changes, the parliamentary joint committee said it was happy for the Australian Competition and Consumer Commission (ACCC) to carry that burden of making recommendations instead. In doing that, the committee welcomed the ACCC’s investigation into this issue, which commenced last month, and recommended that the competition watchdog “draw on lessons from other jurisdictions”.

In addition to its support of the ACCC’s investigation, the committee has recommended for the federal government to have more power, through the Treasurer, in making policies in this space.

It also recommended that the Australian Securities and Investments Commission (ASIC) be given the power to make the ePayments Code mandatory for all industry participants. The code, currently voluntary in nature, regulates electronic payments including ATM, BPay, Eftpos, and credit or debit card transactions, online payments, and internet and mobile banking.

Another recommendation arising from the inquiry included for the Treasurer to direct the ACCC to conduct an in-depth examination of the merits of different regulatory and technological approaches to enabling least-cost routing on mobile transactions, including the merits of consumers retaining the ability to route transactions over their preferred network if they choose to do so.

In July, Commonwealth Bank of Australia (CBA) CEO Matt Comyn complained to the committee under testimony about the lack of access to Apple’s NFC antenna, accusing the tech giant of leaning on its market power to compel the banks into paying fees to use Apple Pay. Two months later, the black and yellow bank said Apple currently has an 80% market share in the digital wallets space.

“The fact that a single provider could have 80% market share in an individual market is usually cause for concern, and this is a company … [whose] market cap is double Australia’s gross domestic product, and certainly in the context of tax receipts, makes very little contribution to Australian government receipts,” Comyn told the committee.

CBA, along with most of Australia’s banks, signed up for Apple Pay in 2019 after they jointly lost their request to the ACCC to collectively bargain against Apple for access to its NFC interface four and a half years ago. 

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CBA sees Apple dominating digital wallets as contactless makes up 90% of card payments

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