Consumer watchdog denies Australian banks’ collective bargain plea
(31 March 2017 – Australia) The Australian Competition and Consumer Commission (ACCC) has denied major Australian banks in their request to collectively bargain with Apple for access to it mobile payment technology.
The regulator said the Commonwealth Bank (CBA), Westpac, National Australia Bank (NAB), and Bendigo and Adelaide Bank were not to band together against Apple and boycott its payment system. Their remaining “Big 4” competitor, ANZ has offered the payment feature for more than a year.
In a statement, ACCC chairman Rod Sims said: "The ACCC is not satisfied, on balance, that the likely benefits from the proposed conduct outweigh the likely detriments. We are concerned that the proposed conduct is likely to reduce or distort competition in a number of markets.”
He said the Apple Pay wallet provided a "multi-user" platform, meaning it was easy to switch between different bank cards.
"The banks are very profitable in Australia and charge very high rates on some products, but customers still find it hard to switch," he said.
"Had the banks been successful, there was the potential for that stickiness to increase."
He added that although the regulator acknowledged that the banks collectively negotiating would place them in a better bargaining position with Apple, "benefits would be outweighed by detriments".
Sims also noted that:
Should banks be successful in obtaining access Apple’s near field communication technology, it would affect Apple's business model, which relies on integrated hardware-software strategy for mobile payments and operating systems more generally and impact how Apple competed with Google and its mobile platform Android.
Access to the technology in iPhones for the banks was "likely to hamper the innovations that are currently occurring" for mobile payments and could reduce the competitive tension between the banks in the supply of payment cards.
Apple Wallet and other multi-issuer digital wallets could increase competition between the banks by making it easier for consumers to switch between card providers and limiting any "lock-in" effect that bank digital wallets might cause, the watchdog said.
The banks issued a joint statement saying it was disappointing after the ACCC had previously described the decision as "finely balanced".
"This case has always been about consumer choice. The applicants made this application to seek to ensure they could participate in the future of mobile wallets, and not have the course of development for mobile wallets in Australia dictated by a single overseas corporation," spokesperson on behalf of the applicants, Lance Blockley, said.
"Mobile wallets are currently overwhelmingly focused on mobile payments, but will soon take in loyalty programs, mass transit ticketing, access, identity and a great number of other future innovations. Ultimately there is no technical barrier standing in the way of our entire physical wallet becoming digital.
"Apple has a stated desire to own the entire mobile wallet, and will use the beachhead into mobile wallets afforded to them by complete control over mobile payments on iPhone to exert control over the rest of the digital wallet. This in our view is aimed at increasing the services revenue they can earn from iPhone users."
The decision would encourage innovation and competition in the digital wallet market, which would benefit consumers according to Sims.
"Obviously what the banks would want to do is have such a great digital wallet it would lock you in.
"All we're talking about here is a chip. You can put a chip in anything.
"Some are presuming everything will be done through a mobile phone, it may be with this decision the banks and others decide they'll put the chip in other devices.
"We didn't want to stop that competition between devices."
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