The group of Australian banks seeking better negotiation powers over the arrival of third party mobile wallets have been denied authorisation to do so in a draft determination by the Australian Competition and Consumer Commission (ACCC). The banks sought authorisation to bargain with Apple in particular, wanting access to the NFC technology within the company’s iPhones.

The ACCC is “concerned that the proposed conduct could reduce or distort competition in a number of markets” and would “reduce the competitive tension between the banks individually negotiating with Apple, which could reduce competition between the banks in the supply of mobile payment services for iPhones”.

“There may also be detriments to competition in digital wallets arising from the proposed conduct,” ACCC says. “Authorisation would allow the banks to agree not to sign up to Apple Pay for three years — this is a significant period of uncertainty and would result in decreased choice for consumers whose banks engage in this conduct.

“The ACCC considers that the conduct could also distort competition between mobile operating systems. Apple’s iOS platform is a differentiated offering that competes globally against other operating systems, such as Android.

‘Distorts competition’

“One of the features each system provides to consumers is mobile payment services and digital wallets. To the extent that the proposed conduct leads to an alteration of the offering that Apple is able to make available on the iOS platform, the proposed conduct distorts competition between these operating system providers.”

“This is currently a finely balanced decision,” says ACCC Chairman Rod Sims. “The ACCC is not currently satisfied that the likely benefits from the proposed conduct outweigh the likely detriments.

“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.

Uncertain development

“However, banks can already offer competing digital wallets on iPhones without direct access to NFC, through their own apps using Apple Pay payment technology or using NFC tags. Banks can also offer digital wallets on the Android platform.”

“Digital wallets and mobile payments are in their infancy and subject to rapid change,” Sims adds. “In Australia, consumers are used to making tap and go payments with payment cards, which provide a very quick and convenient way to pay. It is therefore uncertain how competition may develop with the availability of mobile payments and possible future innovations.”

The ACCC is seeking submissions on its draft determination before making a final decision.

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.

Timeline

• 27 July 2016: Bendigo and Adelaide Bank, Commonwealth Bank of Australia, National Australia Bank and Westpac Bank submitted their request for negotiation to the ACCC;
• 10 August 2016: Apple spoke out for the first time about the banks’ submission, saying it was made up of “factual and legal misstatements”;
• 22 August 2016: The ACCC ruled that it would not grant the banks interim authorization to collectively negotiate;
• 30 August 2016: Supermarket giant Coles put its backing behind the banks with its own submission to the ACCC;
• 31 August 2016: Apple insisted that opening up access to the NFC technology within its handsets was not open to negotiation with any bank;
• 17 October: In an extensive response to the ACCC, the banks criticised Apple’s decision to restrict access to the NFC within its handsets, calling it “completely baseless.”

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