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Australian banks want to boycott Apple Pay, and that's a bad idea

Last week, I left the house without my keys or my wallet. The former was on purpose (I have an iPhone-compatible smart lock); the latter was not.

When I realized my mistake, I was already half an hour from home and running late for a meeting in which I was expected to pay for the food. But I had my iPhone, and being in Canada, took for granted that I would be able to use its proprietary payment solution, Apple Pay, to pay for lunch.

And I did.

When my bank, TD Canada Trust, added Apple Pay support in early June, I relished the idea of being able to use my phone to pay for everything, all the time. The reality, as with all idealized things, is a little more measured — restaurants, for instance, are still very mobile payment-unfriendly — but for the most part, Canada was more than ready for the Apple Pay revolution.

But while I was busy paying for lunch, four Australian banks — Bendigo and Adelaide Bank, Commonwealth Bank of Australia, National Australia Bank and Westpac Banking Corporation — submitted an application to the Australian Competition & Consumer Commission (ACCC) (via MacStories) to collectively boycott Apple Pay and its Android counterparts for three years.

Tension down under

The move is one of the first public acknowledgements of a rift between Australia's highly-regulated — and highly-profitable — banks, which issue credit cards attached to the Visa and MasterCard payment networks, and Apple, which has sought to negotiate with them for the launch of Apple Pay. Like Apple purportedly has done with its yet-to-launch television subscription service, it believes its offering is compelling and competitive, and is unwilling to waver on certain terms and conditions the banks find unfavorable.

In particular, the banks take issue with Apple's locked-down NFC chips, which facilitate the transfer of payment credentials from the iPhone's Secure Element to the merchant terminal machines. This prevents payment services from being integrated into third-party apps controlled by the banks themselves — instead, Apple dictates the entire transaction experience, from the addition and authorization of the credit card to the interface customers see when they tap their phone on a contactless terminal.

This disintermediation of the banks involvement in the payment process is a huge concern for institutions that heavily rely on in-app marketing to sell new credit products, methods that, since the rise of mobile banking, have become even more essential as retail locations lose their efficacy for younger customers.

In particular, the banks take issue with Apple's locked-down NFC chips

The banks are also concerned that alone they won't be able to negotiate in good faith with Apple, which reportedly refuses to pass along per-transaction fee to the customer. In other regions Apple Pay has launched, Apple is believed to earn between $0.15 and 15 basis points per $100 transacted (the former in the U.S., the latter in Canada and the U.K.).

Oh, Canada

Canada is a particularly interesting example, especially given what's happening in Australia. The Canadian banking market, like Australia's, is highly-regulated, and has fostered a group of five enormously powerful institutions that control upwards of 90% of the consumer banking market. When Apple Pay launched in November 2015 — a year after it came to the U.S. — it was only compatible with American Express, because AMEX operates as both a bank and a credit card issuer. That unique relationship allowed Apple to negotiate a deal with the company that likely met its standards for security and accessibility, as well as profit expectations. And while negotiations with Canada's Big Five banks — TD Canada Trust, RBC, BMO, Scotiabank and CIBC — were rumored to be ongoing, they didn't come to fruition until seven months later.

But now that those banks are on board (as well as several much smaller credit unions), the contrast to the intractability of the Australian institutions is even starker. Even stranger is the sole Apple Pay provider in Australia, ANZ, staying largely silent throughout this very public discourse, continuing to offer its Visa (and soon MasterCard) customers the same Apple Pay service as other banks around the world.

Apple Pay is not a perfect solution, and it can be argued that by preventing third-party apps from accessing the iPhone's NFC chip fosters an unbalanced relationship between Apple and the issuer, but as Tim Cook mentioned in the company's Q3 earnings call, nearly three-quarters of the contactless payments made in the U.S. are with Apple Pay. Participating banks no doubt benefit from the virtuous marketing cycle around participation in mobile payment solutions, and if Canada's banks' profit outlooks are any indication, their bottom lines are to see little, if any, negative impact from sending 15 cents of every $100 Apple's way.

Bargaining power

Many of the issues the boycotting Australian banks take with Apple (along with Google and Samsung, though their ire is predominantly directed at Cupertino) stem from the disproportionate amount of bargaining power enjoyed by these firms, who get to dictate not only the technology used in the transactions (NFC) but the security procedures (biometrics, tokenization) and many of the financial terms. They also argue that, in Apple's case, poor implementation of the onboarding process between the customer and the merchant has led to a number of cases of fraud, though there has been little evidence of that, and Apple has since further simplified and secured that process. Indeed, though the NFC chip is not available to third-party developers, it is an open platform that is compatible with the vast majority of the world's contactless payment terminals, while security standards around tokenization were created by Visa and MasterCard as part of the updated EMV standard, which has since been adopted by practically every card issuer out there.

But while the banks stall for as long as three years as it waits for either regulatory action in its favor, or Apple to relent, it is letting millions of customers go without a mobile payment solution at all.

The banks also bring up a so-called regulatory asymmetry. Specifically, credit card issuers are limited in the interchange fees they can charge merchants, and because Apple reportedly won't allow its own cut of those fees to be passed on to customers, the banks are forced to eat the additional cost. This appears to be the crux of the argument: the banks want to be able to offer their own mobile payment solutions through their own apps in a way that is similar but distinct from Apple Pay — the way that many banks allow customers to make mobile payments on Android in addition to solutions like Android Pay and Samsung Pay.

But while Bendingo, CBA, NAB and Westpac stall for as long as three years as it waits for either regulatory action in its favor, or Apple to relent, it is letting millions of customers go without a mobile payment solution at all, in a country that is desperate for it.

In the meantime, the one bank willing to negotiate with Apple has seen a surge of new customers, and will likely continue to benefit — for up to three years.

Daniel Bader is a Senior Editor at iMore, offering his Canadian analysis on Apple and its awesome products. In addition to writing and producing, Daniel regularly appears on Canadian networks CBC and CTV as a technology analyst.

28 Comments
  • "Many of the issues the boycotting Australian banks take with Apple (along with Google and Samsung, though their ire is predominantly directed at Cupertino)" Why they would boycott Google? NFC third party apps are allowed on Android
  • And there are no fees with Google or Samsung I believe so the bank's stance doesn't make a lot of sense.
  • I would like to know the sources about banks complaining against Google and Samsung that the author of this article has used
  • The source is the application for boycott itself, which is referenced here. They take greater issue with Apple Pay, but the boycott includes Android Pay and Samsung Pay, largely because of the disproportionately combination position those companies enjoy in smartphone market share in Australia.
  • I have read the application. Apart that there is no call for a boycott it is something completely different, can you quote the parts were the banks are against Google and Android Pay? Because I don't find any. Do you really have read the bank's application and know what is about?
  • If you click on the link, then read the PDF, it's all in there:
    Certain Third Party Wallet Providers will have considerable bargaining power in relation to card issuers given their influence in the mobile communications landscape. The main Third Party Wallets being introduced in Australia are Apple Pay, Android Pay and Samsung Pay. More than 90% of smartphones sold in Australia depend on either Apple’s iOS or Google’s Android operating system. Samsung is by far the leading manufacturer of mobile devices that use the Android operating system, and Apple is the only manufacturer of mobile devices that use the iOS operating system. As a result, 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.
  • Can you quote where they recommend boycotting Samsung and/or Google Pay? -- Posted via Titanium Galaxy S7 edge --
  • I personally didn't see anything about Google, Android or Samsung in the application you linked us to.
  • This is the trend ? Single out Australian banks like Westpac (as a customer) not to use Apple Pay because their'd rather use what they have .. What's the problem with that ? As long as its not crappy security, there is no problem.. Apple just want everyone to use their stuff... I think that's the official line.. Since there is hesitation, that either means 'We're smarter.." or "stupider" for not getting on board.. Either way, i'm happy to still be using a credit card with a chip in :)
  • Here's the deal. I am a Commonwealth Bank customer and have been all my life. They had some stupid PayPass tag you can stick on the back of you phone. It's not secure like Apple Pay, it's pretty much like having your bank card stuck to the back of you phone. Anyway, I just signed up for an ANZ account to trial for awhile, if all goes well, I will move all my account over to them and ditch the CBA. The stupid games they play while ignoring so many customers has lost my business and a lot of others as well.
  • If you wanted to give Apple Pay a shot without fully leaving Commonwealth, it might just be a matter of applying for an ANZ credit card (no need to move all of your checking/savings/etc accounts to ANZ) and then adding just that credit card to Apple Pay. It would have been too much of a pain for me to switch banks entirely (having to change my direct deposit and the auto-pay on my bills, etc), but it was super easy for me to apply online for another bank's credit card and start using that instead. My checking and savings still sit with my original bank, but all of my credit card transactions go through this other bank that DOES work with Apple Pay. Haha, I even use the new bank's mobile app to pay the credit card bill FROM my checking account at my old bank. As such, I never even had to deal with my old bank; I just stopped using their credit card (and stopped letting them make money off of my card's fees). =)
  • Why not just move everything. Yes it may be a hassle, but if they're going to be stuck up like they are, you should take ALL of your business away from them. See how ANZ works out for you and if it does, leave your old bank. Sure you have some hassle up front to switch everything, but it may be just the thing to do.
  • I've been with St George (a subsidiary of Westpac) for a very long time and have been considering leaving because of their refusal to adopt Apple Pay. For some time Australia, much like Canada, has had contactless payments up to $100 per transaction; it is NOT secure. Come payment you simply tap your card on the terminal and your account is debited via the VISA network, no pin necessary. If you lose your wallet then your in trouble as people can go from store to store making sub $100 transaction until you realise you've lost the card and cancel it. For that reason alone Apple Pay is already an advantage over the existing solutions. The St. George app does not let me use my iPhone to make payments. Bans in Australia are very powerful institutions currently under threat of official investigations into price gouging their customers. To me, this is simply another attempt to maximise their own profits and maintain their power and control of a service that everybody needs. ANZ are about to get another new customer though.
  • Apple pay does not protect u if someone steals your card and uses it on your account (eg u don't need a PIN to use one online for example) It only secures the transaction between you and the bank, but when it gets to the bank.. aka.. is someone has your card but u have not yet reported it stolen it doesn't really matter what payment method u use,,, it won't stop them using it online. *until u report it* which is why banks say report it stolen ASAP.... I look at Apple pay as secure, *but* in another way. Since we now have our cards photographed in our smart phones, that usually means if we are walking down the shops to use Apple Pay, we could leave our wallet at home.... What if there is a robbery ? just made it easier... Te remaining of securing tractions between u and the bank with Apple pay, well,,, we just need to be more careful of users not looking over your shoulder. And quite frankley, I have yet to see anyone do that... The only other reason would in in restraint would be good where the waiter fails to return your card.... Again, not a problem, because u just put a stop on your card there and then, and never go back there... Easy enough to avoid for "secure" payment methods. I see Apple pay more as a "convenience" than actually wondering "I don't even have to think anymore before i do something" I'm all for technology improvements, but its not for me. If Westpac does get it, in won't be using it.
  • If you were using Apple Pay and left your wallet at home, then sure, there is that slight risk of someone breaking into your home and stealing your tap-to-pay card. Although, if someone were to break into my home, I would be much more worried about what else was stolen as I can always cancel my card and work with my bank to reverse whatever charges were made by the thief (which, of course, would certainly be a pain in the ***). But you're running nearly the same risk by using the card around town: I'd imagine the likelihood of misplacing my card or getting mugged would be higher than someone breaking into my home. However, if I'm using Apple Pay exclusively, I no longer have to worry about credit card skimmers (where someone has replaced the "swipe" part of a POS terminal with a device that reads and records your credit card number; a problem the US still deals with a lot because of our ridiculously late adoption of chip-cards), my card's use is secured by my fingerprint, the card number is not viewable by someone "looking over your shoulder" since I am never actually using it (Apple's wallet only shows the last 4-digits, as opposed to the entire number like on your physical card), and a different number is used during every single transaction... so if some technology came out that somehow grabs your card number "out of the air" during your contactless-ApplePay transaction, that number couldn't be used elsewhere. Also, here in the US, NFC-contactless payments are MUCH faster than chip-and-pin/sign payments because the chip-readers at most of our merchants are ridiculously slow. Many of the larger stores still require you to swipe your magnetic strip (the most insecure option) because they don't want to slow down their lines. Thankfully, a lot of these stores do at least let people use Apple/Android/Samsung/Whatever Pay, and the line moves as fast as ever.
  • My credit cards I don't use are locked up in my Safe. A Safe that's bolted to the floor. If you have time to hang around trying to get into my safe, more power to you, though there's almost always someone at home anyway. You can always throw out the what if's. How about this, using Apple Pay, when you buy things in a store, they DON'T have your credit card info!!! if they get hacked like so many places do and grab everyone's credit card Data, you're safe!!! You've been using Apple Pay, which is using a 1 time use Token and they have no customer Data on you also unless you use some type of store card. That's a couple reasons right there to use Apple Pay.
  • Exactly! =)
  • As a Westpac customer, I'm frustrated by the delays in implementing Apple Pay, but at the end of the day I have a tap-and-pay card anyway so it's not that big a deal. I use Westpac for everything, so switching to ANZ simply to access Apple Pay seems like using a sledgehammer to crack a nut. As the article states, it's the customers who lose out.
  • If you wanted to give Apple Pay a shot, it's just a matter of applying for an ANZ credit card (no need to move all of your checking/savings/etc accounts to ANZ) and then adding just that credit card to Apple Pay. It would have been too much of a pain for me to switch banks entirely (having to change my direct deposit and the auto-pay on my bills, etc), but it was super easy for me to apply online for another bank's credit card and start using that instead. My checking and savings still sit with my original bank, but all of my credit card transactions go through this other bank that DOES work with Apple Pay. Haha, I even use the new bank's mobile app to pay the credit card bill FROM my checking account at my old bank. As such, I never even had to deal with my old bank; I just stopped using their credit card (and stopped letting them make money off of my card's fees). =)
  • I think this stance, however warranted, could risk them losing a significant amount of customers. Regardless of the perceived security risks by some people, being able to pay for things with your phone looks cool and incredibly convenient, and I think for many people, that is the driving factor.
    Luckily, I am with ANZ, but if I wasn't, I would strongly be considering switching, just for Apple Pay. I'm sure I'm not the only one. Sent from the iMore App
  • just FYI, second last paragraph you have "Bendingo" instead of Bendigo Bank (mine). I was surprised that this minnow, compared to the other 3, would join the ACCC submission.
    I'd love it if the Bendigo Bank would embrace Apple Pay so as to get a competitive edge a la ANZ Bank.
    This cartel (minus Bendigo Bank) continues to try and rape Australian and New Zealand citizens with fees, charges, etc etc, albeit ANZ being the break away rebel regarding Apple Pay. ANZ does not offer Apple Pay in New Zealand though which i find very curious.
  • It's not only Australia that is affected, but other ankhs owned by the big four. In Scotland the Clydesdale Bank is owned by one of the big Australian four, and is denting its customers the opportunity to use Apple Pay. It doesn't stop me making payments, so long as I have my chip and pin card with me, but your description of the situation you found yourself in, happens a lot more than you realise. I've left the house without my wallet, running for a train, and would've been saved by Apple Pay. I'm seriously considering switching banks,(even if that means going through the stress of alerting all my direct debits to the change), because Apple Pay would be a big win for me. Sent from the iMore App
  • It would have been too much of a pain for me to switch banks entirely (having to change my direct deposit and the auto-pay on my bills, etc), but it was super easy for me to apply online for another bank's credit card and start using that instead. My checking and savings still sit with my original bank, but all of my credit card transactions go through this other bank that DOES work with Apple Pay. Haha, I even use the new bank's mobile app to pay the credit card bill FROM my checking account at my old bank. As such, I never even had to deal with my old bank; I just stopped using their credit card (and stopped letting them make money off of my card's fees). =)
  • Even before I got to the last line about ANZ enjoying a surge of new customers, I was already laughing to myself that the other banks were going to regret this due to loss of business. My own bank-issued credit card didn't work with Apple Pay, so instead of waiting for them to come around, I just stopped using their card. I didn't completely leave my bank for another, but it took all of five minutes to find a no-fee, high-benefits card from a competitor and add it to my Apple Pay. My money may still be with my original bank, but they are now losing out on the interchange fees from my credit card purchases. Sure, that amounts to almost nothing, but if there are a large number of customers like me that adds up over time. The Australian banks that are trying to play hardball will start to feel that once customers stop using their banks' credit cards and/or move their money entirely to ANZ (which, of course, would hurt the most).
  • If would have more effect on their bottom line if you just completely left them!!! People leaving them and closing accounts is far more noticeable then someone slowing down or stopping using their card. Really now you have to transfer money form your old bank to your new card, or pay your new card bill. It just doesn't have the same effect.
  • Very true, and it did cross my mind to leave my original bank completely. My personal dilemma (beyond the nuisance of having to change all my automated stuff) was that my current "money" bank has ATMs everywhere, and my "credit card" bank has very few. *shrug* Then again, I'm not so much out to hurt my old bank as to have the best of both worlds: the convenience of Apple Pay for the majority of everyday purchases, and access to physical ATMs (without service fees, of course) pretty much wherever I go.
  • ANZ is supported though.... Don't miss them out. http://www.anz.com/personal/ways-bank/mobile-banking/apple-pay/faqs/#Whi...?
  • During Apple's third quarter earnings call, CEO Tim Cook shared the following tidbits on Apple Pay:
    • "Tens of millions of users" are using Apple Pay.
    • Apple Pay monthly active users up more than 450% year over year.
    • Three out of four contactless payments made in the U.S. are done with Apple Pay, according to Cook.
    • Apple Pay is accepted in three million locations in the U.S. and in nine markets around the world.
    "The growth is astronomical, but the base is very small," Cook said ... And therein is the reality, "the base is very small" ... The reality is, Apple needs the retail banks to monitize Apple Pay; the banks don’t need Apple or Apple Pay … The other big Australian banks aren't interested in paying Apple to allow Apple to better market their new iPhones; the banks probably think that Apple should be paying them; it's akin to expecting the media to pay advertisers to get them to advertise in their publication—LOL ... Android Pay and Samsung Pay aren't asking the banks to pay them a fee to better market their phones ... Apple Pay—still a proprietary OS solution to a payments problem that simply does not exist …