​Banking cartel calls Apple Pay alternatives 'unrealistic' in Australian market

The group of four banks collectively bargaining for access to the iPhone's near-field communication (NFC) technology have baulked at settling for payment alternatives such as Android Pay, calling them "unrealistic" in the Australian market.

The Commonwealth Bank of Australia (CBA), Westpac Banking Corporation, the National Australia Bank (NAB), and Bendigo and Adelaide Bank have been seeking regulatory approval since mid-last year to collectively negotiate with third-party mobile providers such as Apple on conditions relating to competition, best practice standards, and efficiency.

In its most recent submission [PDF] to the Australian Competition and Consumer Commission (ACCC), the banking cartel explained that its members developed their own NFC mobile wallets on the Android platform prior to current multi-issuer mobile wallets being announced, and expressed interest in doing the same on Apple's platform.

The banks also expect other providers of mobile wallets and other NFC functions to soon emerge, which they said might include merchants, telecommunications providers such as Optus Pay in Australia or Singtel and Orange internationally, and fintech startups such as Myki Plus -- an NFC app sprouting from Melbourne's public transit cards -- but only on the Android platform.

"Some of these international examples have relied on the Android platform and on non-NFC point-of-sale technologies such as PIN or barcodes," the bank's submission says, adding that other countries have less NFC infrastructure in place than Australia, and that Android has a much greater presence outside of Australia, as well.

"These alternatives are unrealistic in Australia, which has the world's highest adoption of contactless NFC card payments and one of the world's highest iPhone market shares, particularly among customers likely to use mobile payments," the banks said.

"In Australia, potential mobile wallet providers other than Apple are locked out of the established payment infrastructure in respect of the clear majority of relevant customers."

Throughout the process, the banks have claimed that they want access to the NFC controller in iPhones and reduced their argument last month to solely focus on such, as Apple currently does not allow any other entity direct access to its technology.

The group has been arguing that access would enable them to offer their own integrated digital wallets to iPhone customers in competition with Apple's digital wallet without using Apple Pay -- which is what Apple wants to avoid.

"To make this point abundantly clear, the applicants are willing to limit collective negotiation to NFC access alone -- ie, the ability to collectively negotiate for the removal of the pass-through restriction will be taken off the table," the cartel said earlier this year.

The banks' comments come after Apple argued in its submission to the ACCC previously that the collective application is not about access to the iPhone's NFC technology; rather, it is an attempt to avoid paying the fees associated with using Apple Pay. Apple noted that it "will not, and cannot, agree to the terms sought by the banks".

The latest submissions from both the banking cartel and Apple are in response to a draft determination handed down by the ACCC in November that moved to deny the banks collective bargaining rights against the iPhone maker.

"This is currently a finely balanced decision. The ACCC is not currently satisfied that the likely benefits from the proposed conduct outweigh the likely detriments," ACCC chairman Rod Sims said at the time.

"While the ACCC accepts that the opportunity for the banks to collectively negotiate and boycott would place them in a better bargaining position with Apple, the benefits are currently uncertain and may be limited."

In their latest submission, the banks held firm that NFC access would create opportunities to invest in NFC capabilities that do not exist without access. Particularly in a relatively small market like Australia, the banks said that larger addressable market provided by NFC access on the iPhone platform increases the incentives to invest, and would reduce the cost and risk of failure and enhance the likely chances of success.

"Apple already provides access to many third-party apps that send and receive information through iPhone hardware features such as the camera, microphone, speaker, and Bluetooth interfaces. These apps can access the iPhone's hardware without having to launch an Apple app," the banks said.

"As a result, there has been a proliferation of innovative apps that use the iPhone camera for purposes Apple could not have imagined. There is no reason why the NFC function should be treated differently, and the Android platform shows that multiple applications can use the NFC function as seamlessly as they can use any other hardware feature."