Apple Wins Battle With Banks Over Mobile Payments

Apple Inc. won the first round of a battle with Australia's largest banks, which have been trying to force the tech company to offer them access to its Apple Pay technology that allows smartphones and tablets to communicate with payment terminals.

The decision could help smooth Apple Pay's difficult entry into Australia, where mobile-payment technology is more advanced than in the U.S.—chip-and-pin payments, widely rolled out in America only in the past year, are virtually passé in Australia—and where most consumers simply wave a debit or credit card near a reader to make everyday payments.

In a draft ruling on Tuesday, Australia's antitrust watchdog said it wouldn't allow Commonwealth Bank of Australia Ltd., Westpac Banking Corp., National Australia Bank Ltd. and regional lender Bendigo & Adelaide Bank Ltd. to collectively boycott Apple's mobile-payments platform. The lenders, which together account for about two-thirds of household deposits and issued credit in the country, had sought permission to negotiate collectively with Apple to avoid antitrust action. The regulator, the Australian Competition and Consumer Commission, will make a final decision in March.

Apple has defended its hold over access to its technology and characterized the banks' action as an attempt to blunt Apple Pay's entry into the Australian market. It said in a statement it welcomed the draft decision and would work with individual banks to bring Apple Pay to their customers.

Only one of the country's big four banks, Australia & New Zealand Banking Group Ltd., has signed a deal with Apple to use Apple Pay, which launched Down Under in late 2015 with American Express Co.

Apple doesn't allow any entity direct access to its near-field communications controller—technology that communicates with payment terminals in stores—for reasons, it says, of privacy and security. Banks can make use of it through Apple's digital wallet—for a fee.

The banks argued that they should be able to offer competing wallets on Apple's iOS platform, increasing competition and innovation in digital wallets and apps, and that by being able to negotiate collectively increased their chance of doing so.

Rod Sims, chairman of the competition regulator, said Australian banks can already offer digital wallets on iPhones through their own banking apps, without direct access to Apple's near-field communications system. Some banks, including National Australia Bank, already offer mobile-banking applications on Apple devices that allow users to check their balances, control their credit cards and make online payments. Australian banks can also offer their wallets on rival phones that use the Android operating system.

"Apple Wallet and other nonbank digital wallets could represent a disruptive technology that may increase competition between the banks by making it easier for consumers to switch between card providers and limiting any 'lock in' effect bank digital wallets may cause," he said.

In its submission to the regulator, Apple said authorization for a cartel among the banks would perpetuate "oligopolistic" banking conditions in Australia, and that Apple Pay was an example of competition that the banks wrongly perceived as a threat. It said it couldn't agree to the terms the banks were seeking, including allowing them to charge customers for using Apple Pay.

The banks, in a joint statement, said that if the regulator's ruling stands it would mean iPhone users have no choice on the digital wallet they use for payments, and the industry would be denied the chance to compete with Apple. They said their application wasn't about preventing Apple Pay from coming to Australia or reducing competition, but about providing consumer choice.

Write to Robb M. Stewart at [e-mail]

(END) Dow Jones Newswires

November 29, 2016 02:25 ET (07:25 GMT)

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