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Bill Bennett


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. I’m glad you asked. In normal times it is illegal for competitors to collude with each other. Regulators fear this can lead to bad things for customers. ↩︎




2 thoughts on “Here’s the thing about Apple Pay and banks

  1. “It can mean rivers of gold.”

    “Rivers of gold,” how Rupert Murdoch once described classified advertising pages in newspapers. And Roy Thomson famously called an ITV franchise “a licence to print money.” Once upon a time telephony per minute charges returned immense rewards and currently banking’s obsession with transaction fees is a reminder of where the money comes from.

    Those rivers tend to dry up pretty quickly in an environment where a motivated altruist can exploit technological abundance to route around gatekeepers and hierarchy. At the same time, these disintermediations can occur faster and more universally due to the availability of open source code, collaborative tools and their foundation and vector, the Internet.

    What the Internet inflicted on other distribution networks, it will on banks too. https://www.youtube.com/watch?v=h38nfiEpx2U&feature=youtu.be&t=43s And to be honest, do even they think they don’t deserve it?

    The payments network is a heap of legacy cruft that adds layer after layer of grasping rent seekers and the pushback has already begun. I like using paywave, but only at McDonalds because I doubt Macca would install the thing if the fees weren’t either waived or greatly reduced. Elsewhere I see handwritten notes explaining the service is too expensive for the retailer.

    MBIE is conducting a Retail payment systems consultation

    Once again banks greed, limited competition, and regulatory/surveillance co-dependence with the State means that the value exchange network is being clogged and burdened with legacy technologies, payment fees, and least useful, AML/KYC/CFT obligations that are onerous and don’t appear to have resulted in any improvement in law enforcement.

    If Apple, or any of the four riders of the apocalypse (Facebook, Apple, Google, Amazon) are going to have significant impact on the payments scene it won’t be by launching atop the legacy quagmire of the existing and retaliatory banking network. They’ll have to either start from scratch or validate and promote a new more digitally native system.

    The incumbents won’t, on the contrary: https://web.archive.org/web/20170214221420/https://www.cryptocoinsnews.com/bitcoins-growth-in-the-u-k-continues-to-be-stifled-by-banks/. Similar stories from Australia and New Zealand.

    But perhaps the Frightful Five (https://www.nytimes.com/2016/01/21/technology/techs-frightful-5-will-dominate-digital-life-for-foreseeable-future.html) are aging and less interested in disruption. Google’s sad flirtation with (http://disruptivewireless.blogspot.co.nz/2017/02/telcos-oems-you-should-ignore-gsmas.html) GSMA’s “Advanced Messaging”, RCS & “Universal Profile” and Apple’s efforts within the existing closed financial system suggest this is true.

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