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Apple under attack from Australia's biggest banks over Apple Pay

Four Australian banks are uniting against Apple in a bid to get the famously-closed tech company to open up. But as they say in the classics, don't upset the Apple, cartel...


Apple Pay is already established in Australia, but four of the country's banks want their own mobile wallets for iOS.


The FBI couldn't break into the iPhone, but now four banks in Australia are taking the fight to Apple in the hope that they can loosen the tech titan's tight grip on its cash cow.

Three of Australia's "big four" banks -- Commonwealth Bank, NAB and Westpac -- as well as the smaller Bendigo and Adelaide Bank, are battling Apple over its Apple Pay mobile payment platform, and being accused of cartel behaviour in the process.

The banks all want to get access to the inner workings of Apple's NFC hardware. Using the contactless technology built into the iPhone, the banks hope to build dedicated third party apps capable of making tap-and-pay transactions, without actually using Apple Pay itself.

With 3,000 financial institutions around the world on the Apple Pay bandwagon, the stakes are high. Apple hasn't opened up its hardware for any of these institutions, and it has no intention to start now.

But the Aussie banks are hoping for strength in numbers. They've applied to Australia's competition watchdog, the Australian Competition and Consumer Commission, seeking collective bargaining power to fight Apple as one -- a fiscal Voltron, if you will.

It might seem strange for some of Australia's most powerful companies to band together for negotiations -- and that's why they have to seek approval from the ACCC. Without it, any collusion between the banks is illegal.

The ACCC's role in the saga is simply a decision on whether on not to grant the banks collective bargaining power. In August, the ACCC denied the banks "interim authorisation," meaning they'd have to wait until a finalised decision could be brought down. The final verdict is due in October.

But while we wait for the decision on whether collective bargaining is anti-competitive, the public has been given an inside look into just what Apple thinks of the banks that want to use Apple Pay for themselves.

So where does this leave cardholders who just want to use their phone to pay for things like citizens of the future should be able to?

Fat cats or underdogs?

The banking sector is no underdog. But compared to Apple, Australian banks are minnows, and they say they've got limited power against the tech giant.

"Apple exercises a high degree of control over its products and services," the banks' submission to the ACCC reads. "It often delays granting third-party access to its hardware and software features and generally grants this access on a limited and tightly prescribed basis."

While this tight control might breed simplicity and consistency in Apple products, the banks says it can come at "the expense of user choice and competition."

So what does a little joint bargain power hurt?

Playing a game of oligopoly

Apple takes a different view -- the banks don't need more power.

In a submission to Australia's competition regulator, made public today, Apple warned against perpetuating "oligopolistic banking market conditions" in Australia, by letting banks that represent two thirds of Australian card holders join forces.

"Apple Pay is an example of competition and innovation that the applicant banks evidently perceive (wrongly, in Apple's view) as a threat," the submission read.

Apple says the banks are still free to build iOS apps, or to join the Apple Pay fold by letting their customers use their bank-issued cards within the Apple ecosystem.

More fees, less security

Apple Pay works on the Apple Watch thanks to NFC technology, and the banks want access to that hardware.

Andrew Hoyle/CNET

Apple also claims that, if the banks are permitted to negotiate as a group, they will only offer Apple Pay if they're permitted to charge customers fees for using the platform. Apple currently doesn't charge fees anywhere in the world for using Apple Pay.

They also say the banks want direct access to NFC hardware on the iPhone, and that they're asking Apple to agree to "security guidelines drafted by applicant banks." Apple says these conditions would undermine the "availability, security and privacy" that Apple users expect when using Apple Pay.

More delays for Apple Pay?

While this fight continues, we can't see these banks jumping into the Apple Pay ecosystem in Australia. That means millions of their customers across the country won't be making iPhone tap payments any time soon.

The banks have applied for group negotiating power for a period of three years. According to Apple, that means the banks "would have little incentive to compete amongst themselves" to develop good mobile payments systems. It could also mean a three year delay for customers who want to use Apple Pay with their existing card. This is a country that has rapidly adopted mobile payments and is eager for more options.

In the mean time, the other major bank in Australia's "big four," ANZ, is not part of the action and has adopted Apple Pay for ANZ-issued Visa, MasterCard and American Express cards. By keeping their head below the parapet, they may have made their customers the happiest.

Fighting for consumers

What if the banks are successful? It would mean one of the (still massive) little guys setting a global precedent against Apple. With thousands of financial institutions around the world currently not charging fees for Apply Pay or allowed direct access to Apple's NFC hardware, there are big implications.

Will the banks win? It's hard to imagine. As one industry insider put it to me, why would Apple spend all their time, resources and R&D on developing intellectual property that is then opened up to third parties? They certainly haven't done it before with their famously closed ecosystem.

But with mobile payments rapidly becoming the next frontier of retail, finance and consumer convenience, it's a fight we're watching closely.