Four of Australia’s largest banks have been dealt a blow in their fight with Apple by the competition watchdog.

The ACCC issued a draft determination today stating it won’t allow CommBank, Westpac, NAB and, Bendigo and Adelaide Bank to join forces in order to collectively negotiate or boycott Apple over Apple Pay.

The banks sought permission from the ACCC to bargain with Apple on two fronts: access to the Near-Field Communication (NFC) controller in iPhones which would allow the banks to offer their own integrated digital wallets to iPhone customers and, removing restrictions Apple imposes on banks preventing them from passing on fees that Apple charges the banks for the use of its digital wallet.

Apple does not allow any entity direct access to the NFC. Nevertheless, the banks argued access to NFC controller in Apple’s handsets would increase innovation and investment in wallets and other mobile applications which use NFC. The banks argued the increased negotiating power would allow them to increase the level of competition in the digital wallet market, offering consumers more choice and pricing efficiency.

“While the ACCC accepts that the opportunity for the banks to collectively negotiate and boycott would place them in a better bargaining position with Apple, the benefits are currently uncertain and may be limited,” said Rod Sims ACCC Chairman.

“This is currently a finely balanced decision. The ACCC is not currently satisfied that the likely benefits from the proposed conduct outweigh the likely detriments,” Sims said.

The decision isn’t final and the ACCC is seeking submissions on its draft determination before making a final ruling.

The banks are yet to reach a deal with Apple to enable their cardholders to use Apple Pay. Only ANZ and American Express have adopted Apple Pay in Australia so far.

The ACCC flagged concerns that the proposed conduct may decrease competition by reducing the competitive tension between the banks which could reduce competition between the banks in the supply of mobile payment services for iPhones.

“Apple Wallet and other non-bank digital wallets could represent a disruptive technology that may increase competition between the banks by making it easier for consumers to switch between card providers and limiting any ‘lock in’ effect bank digital wallets may cause,” Sims said.

There may also be detriments to competition in digital wallets arising from the proposed conduct. Authorisation would allow the banks to agree not to sign up to Apple Pay for three years — an eternity in a rapidly changing digital market.

“However, banks can already offer competing digital wallets on iPhones without direct access to NFC, through their own apps using Apple Pay payment technology, or using NFC tags. Banks can also offer digital wallets on the Android platform,” Sims said.

“Digital wallets and mobile payments are in their infancy and subject to rapid change. In Australia, consumers are used to making tap and go payments with payment cards, which provide a very quick and convenient way to pay. It is therefore uncertain how competition may develop with the availability of mobile payments and possible future innovations.”

UPDATE: Banks respond
Responding the the draft determination, the applicant banks said they would continue working with the ACCC.

“If the draft determination of the Australian competition regulator stands, effectively there will be no competition against Apple for mobile payments on the iPhone,” payments specialist and spokesperson on behalf of the Applicants, Lance Blockley, said.

“The application has never been about preventing Apple Pay from coming to Australia or reducing competition between wallets. It has always been about providing consumer choice and innovation.

“Many organisations supported our application with their own submissions, across major retailers, fintech companies and card schemes, and we encourage them to respond to the draft determination with further submissions during the consultation period. The applicants are confident that the proposal would have real benefits and would avoid the detriments of Apple’s conduct, and look forward to the opportunity to provide that evidence to the ACCC.”

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