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Australian banks seek stronger negotiating powers with third party mobile wallet providers

National Australia Bank
OPEN WALLET: Australian banks aim to negotiate with third party service providers

A group of Australian banks have submitted an application to the Australian Competition and Consumer Commission (ACCC), urging for the right to ensure they are able to “collectively negotiate” with third party mobile wallet providers. The move seeks to facilitate competitive outcomes for the introduction of mobile payment services

Westpac, Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Bendigo and Adelaide Bank are seeking authorisation on behalf of themselves and potential other credit and debit card issuers to negotiate in areas relating to competition, best practice standards and efficiency and transparency of mobile wallets.

The banks also touch upon Apple’s decision to restrict its devices’ NFC functionality and are urging the ACCC to grant them non-exclusive access to the iPhone’s NFC chip. This would enable other mobile payment services to launch NFC mobile payment services on iPhone handsets.

The application states that the banks wish to negotiate in response to any technological or other exclusivity that a third party mobile wallet provider may seek to impose. This might include refusing, restricting or failing to provide software access to any payment functionality built into devices manufactured by or for operating systems developed or distributed by third party mobile wallet providers —  including NFC functionality.

The banks are also seeking authorisation to enter into a limited form of collective boycott in relation to a third party mobile wallet provider while collective negotiations with that provider are ongoing.

Bargaining powers

“The main third party wallets being introduced in Australia are Apple Pay, Android Pay and Samsung Pay,” the banks say. “Google has significant bargaining power in negotiations relating to Android Pay due to its control of a key operating system, and Samsung has significant bargaining power in negotiations relating to Samsung Pay due to its control of key mobile hardware.

“However, Apple has particularly significant bargaining power in negotiations relating to Apple Pay due to its control of both a key operating system and key mobile hardware. Apple’s refusal to provide third-party apps with any access to the NFC functionality of its devices sets it apart from other hardware manufacturers, operating system providers and third party wallet providers such as Google, Samsung and Microsoft.

“Ensuring that third party mobile wallets are introduced in Australia on a non-exclusive basis will increase competition, customer choice and confidence, innovation and investment in mobile wallet and mobile payment services across the industry,” the application continues.

“A minimum level of investment in mobile wallet and mobile payment services is likely to continue even if the addressable market is limited to the users of a particular mobile platform. However, limiting the level of choice and competition for users of a platform representing a major segment of the mobile phone market would delay and distort the mainstream adoption of mobile payments in Australia by restricting customer choice and confidence in the system.

“Ensuring that the market remains open and competitive for all users would significantly promote the development of new and innovative mobile wallet and mobile payment services that will compete with each other for the ultimate benefit of consumers.”

Critical timing

The banks are requesting that the ACCC grant interim authorisation within 28 days of lodgement of the application so that applicants — and any other issuers that wish to participate — may commence negotiations.

“This is a critical time for mobile wallets and mobile payments in Australia,” the banks add. “As of mid-July 2016, all three major third party wallets have now launched in Australia and the development of the mobile wallet industry is likely to accelerate due to a number of initiatives now underway.

“The proposed collective negotiation is intended to have a number of benefits, including greater competition in mobile payments, greater compliance with industry standards and best-practice principles, and greater price transparency in payments. The conduct to be authorised will not prevent or impede the entry of any third party wallet into Australia or restrict customer choice.”

Apple Pay launched in Australia in November 2015 with support from American Express. The company met with resistance from the banks before ANZ became the first of the country’s big four to add support for the service in April 2016.

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