Feb 21, 2017A group of Australian banks has applied for permission from the Australian Competition and Consumer Commission (ACCC) to directly negotiate open Near Field Communication (NFC) functionality with Apple for iOS devices used for payment systems in Australia. The application challenges the company's closed Apple Pay system, by seeking open NFC functionality on iOS devices in that country.
The application originally sought permission to negotiate jointly for access to Apple Pay, a proprietary system useable only by iOS devices. Last week, however, the group of banks announced that it had narrowed its application to only open-access NFC. The ACCC is expected to respond to the application next month.
The four banks—Bendigo and Adelaide Bank and its Adelaide Bank division, as well as Commonwealth Bank of Australia, National Australia Bank and Westpac—indicated, in their application, that open NFC access would provide greater benefits to consumers in Australia by enabling the use of iOS devices for payments, as well as other NFC-based systems such as loyalty programs, and various solutions for retail, transportation or other markets. At the same time, the bank group indicated that it "flatly rejected Apple's unsupported assertions that the application is about an objection to the fees that Apple wishes to impose rather than NFC access." The group referred to that conjecture as conspiracy theories and fantasy. Apple has not responded to a request for comment about the application.
Users of iOS devices, when attempting to utilize another mobile wallet system, may view an Apple Pay logo, but find that when they tap on the prompt, it launches Apple Wallet. The bank application indicates that open NFC on Apple devices would enable greater competition between mobile wallet systems, as well as greater benefits for providers and users, since it would provide access to the greatest number of consumers—those with both Android- and iOS-based phones.
For years, NFC technology has been provided as an open function on Android devices, around which businesses can build their own solutions. For that reason, NFC is being used for everything from authentication to access control and smart posters, but only with Android-based smartphones and tablets.
On the other hand, Apple's recent iOS devices have come with built-in NFC transponders, yet operate only with Apple's proprietary Apple Pay system, which means the phone or tablet will not operate with open NFC-based systems. Apple Pay is available only for Apple Wallet, but not for other mobile-wallet systems. According to the four banks submitting the ACCC application, that is too restrictive for their customers, as well as for Australian consumers in general.
The key concern for the banks, says Lance Blockley, a payments specialist and spokesperson on behalf of the applicants, is greater competition and choice for consumers. "This is about the future of mobile payments in Australia," he says, citing previous comments in which the group indicated that a genuine level playing field enables consumers to have a choice beyond Apple Pay.
Assuming ACCC approval, Blockley says, "Collective negotiation would be limited to access to the NFC function only. All other items, such as individual deployments, would be one-to-one negotiation."
The bank group stated, in the application, that it will work with Apple to ensure that NFC apps can co-exist on the iPone, and that the user experience in switching between them will be simple and convenient for any user who wishes to install a competitive mobile wallet.
Whether the ACCC approves or rejects the application, the decision could set an interesting precedent, says Phil Sealy, a senior analyst at ABI Research. The Apple Pay system, he explains, has been very successful in providing a contactless payment system that is the only NFC-based system enabled on the iOS devices. The challenge from the four Australian banks may be the first legal action, he says, to attempt to break that mold. "If they lose," Sealy states, "I think other people are likely to think that there's no point in trying" to challenge Apple's NFC restrictions in other parts of the world. On the other hand, if the ACCC approves the application, Apple will face pressure to provide an open NFC function on its devices in Australia, which could be of interest to banks and consumers worldwide.
"For me," Sealy says, "it shows that the banks of Australia understand that you have to add value for consumers." That, he adds, would encourage consumers to choose mobile phone-based payments rather than those with a credit or debit card.
The addition of other innovative services, including loyalty and couponing, creates a more powerful payment tool for consumers, Sealy says, while also allowing banks to collect more data via an intuitive new media—a smart device—through which they can connect and communicate with their wallet users. "Making a payment on a smartphone or wearable still has a degree of novelty, but that novelty will wear, and this is when the convergence of payments with other applications will come into play," he states, "creating a level of consumer stickiness in order to maximize the opportunity in the shift from physical to digital wallets."
Apple has made concessions for NFC-based standards in other parts of the world already—for instance, its iPhone 7 and iPhone 7 plus are equipped with Sony FeliCa NFC technology that allows Japanese consumers to make Apple Pay transactions in stores, via apps or online, as well as for transportation payments.
