In an historic ruling the ACCC today denied the remaining Big 3 Australian banks’ demand to negotiate with Apple as a cartel, determined to maintain their lock on credit card transaction fees, and stifle competition.
While ANZ Bank recognised an opportunity to gain a lead on its competitors and reached agreement with Apple to support Apple Pay, the remaining Big 3 Australian Banks fought to retain the almost cartel-like structure. A structure that surely verges on price fixing, enabling the banks to limit open competition, and maintain a vice grip on processing fees, to feed their insatiable need for even greater profit. The prospect of having to share processing fees with an upstart outside of their cartel apparently stuck fear into the heart of the Big 3 Banks and their CEO’s.
Recent statements from the ACCC indicated it could be a close decision, and one could assume the banks, used to the ACCC turning a blind eye to their obscene stiffing of customers with fees and interest rates, expected to, once again, get their way.
“Offering Consumer Choice”
While the big three Banks’ spokesperson Lance Blockley attempted to position their strategy as “offering consumer choice”, the strategy was to achieve the exact opposite, stifling choice, cementing their grip on payment transaction fees, and blocking a system that allows multiple cards from multiple providers.
If allowed direct access to the NFC components in the iPhone, each bank would have been able to impose their own processing system, defeating one of the key aspects of the Apple Pay system, namely, being able to load multiple cards from different providers and choose which to use at the moment of payment.
Under the banks’ system, the consumer would need to load multiple payment apps, each supporting only one bank’s cards if they wished to used cards from more than one of the Big 3.
What the banks appear to fear most, is that freedom payment systems such as Apple Pay give the consumer. The freedom to load one, secure payment system and add or remove cards at will.
The ACCC recognised this, Chairman Rod Sims, stating; “Apple Wallet and other multi-issuer digital wallets could increase competition between banks by making it easier for consumers to switch between card providers.”
Unlock The Security Feature That Sets Apple Pay Apart
Apple Pay’s success relies on the embedded secure processor, that removes the need to keep card details on the phone, generating a device-specific number and unique transaction code. Also, Apple Pay doesn’t keep transaction information that can be tied back to the customer. The thrust of the attempted cartel negotiation was to force Apple to unlock access to this secure enclave payment system, potentially exposing consumers to greater risk, and of course, providing detailed consumer data to the bank.
Thankfully the ACCC denied this request.
Negotiate in Good Faith, or Continue to Obstruct?
It remains to be seen whether the Big 3 Australian Banks and wanna-be big, Bendigo and Adelaide Bank will recognise the demand for Apple Pay and negotiate in good faith, or focus on attempts to force customers wanting digital payment systems to move to less secure Android, or even bank specific devices.
Apple Potential Huge Profits From Decision
Of course, Apple is no Robin Hood, stealing from the rich banks to give to the poor. Their aim with Apple Pay is to achieve significant revenue from this service while offering consumers the ultimate in security (and of course limiting Apple’s financial exposure if they had offered a less secure system).
In considering the merits of the ACCC decision, we should recognise Apple invested millions of dollars and many man-years in developing this secure enclave processor to provide a payment system more secure than any other offered at the time. Should they have to hand access to that system to banks for next to nothing? Where would be any incentive to make that investment if banks were able to gain access by government edict?
It should be noted, in all other developed countries banks have negotiated with Apple in good faith, and secured agreement. They negotiated, rather than attempt to force access as has been the case in Australia, the home of some of the most profitable and predatory banks in the world.
In this case, the ACCC has shown some spine and made the correct decision.