Here's the thing about Apple Pay and banks

Apple insists banks don’t pass on Apple Pay charges to customers. Banks accept this in most countries. But not in Australia and, by extension, New Zealand.¹

Wrangling over the issue slowed Apple Pay’s progress in both countries.

Three of Australia’s four big banks asked that country’s regulator for permission to negotiate with Apple as a group.²

The fourth bank, ANZ, has its own agreement with Apple.

On Monday Westpac, Commonwealth Bank and National Australia Bank took fees off the table. In return they want Apple to open up the NFC chip in iPhone. That will allow them to run their digital wallets in direct competition to Apple Pay.

The dispute is almost academic. Digital wallet take-up rates are miniscule. For now digital wallets are a rounding error in transaction statistics. Yet everyone involved thinks they will soon be huge.

The Australian reports ANZ completed 10 million Apple Pay transactions since launching nine months ago. This compares to seven billion credit and debit card transactions in a year.

Banks and phone makers expect digital wallets to take off when they add other features. Driver’s licences, loyalty cards and membership schemes are at the front of the list. So are public transport cards.

Replacing wallets with Apple Pay

Both Apple and the Australian banks hope people will one day no longer carry conventional wallets. Both want the game to play out their way.

The key to understanding the dispute is that both sides are big, powerful semi-monopolies. Both want control and both want to clip the ticket on every transaction. It can mean rivers of gold.

The Australian banks argue that opening up the iPhone NFC chip will allow innovation to flourish. Apple argues customers will get a better digital wallet experience if it retains control. Among other things it means customers can run cards issued by different banks from a single app.

Banks elsewhere might be as uneasy with Apple Pay, but few banking markets are as tight-held as Australia and New Zealand. This gives the local big banks a clout that, say, US banks don’t have.

Customers want them all to get on with it. A handful of geeks have swapped to ANZ to use Apple Pay. If that trickle was a flood, the other banks would soon change their tune.

1. That’s because Australia’s dominant big four banks are also New Zealand’s largest banks. ↩︎
2. Good question. In normal times it is illegal for competitors to collude with each other. Regulators fear this can lead to bad things for customers. ↩︎