But the ACCC appears to be adopting a tougher line against Apple, following its digital platform inquiry, which raised concerns with Apple’s and Google’s market power over apps. The ACCC, which will appear before the PJC next week, told the committee in a submission that with “rapid technological change and evolving markets, ensuring effective competition becomes all the more important.”
If banks cannot utilise the features of the iPhone to create their own tap-and-go payment apps “this has potential to limit the competitive constraint of existing and potential rival apps due to these product limitations,” the ACCC added.
The Australian Banking Association told the committee there is “merit in enforcing greater transparency and oversight of the terms and conditions of access to mobile devices”.
The Reserve Bank said while technology platforms “have the potential to improve the efficiency and security of the payments system by providing innovative new services, they can also introduce new direct and indirect costs” and “as digital wallets become more widely used, wallet providers could obtain substantial market power and this could have implications for competition and efficiency in the payments system.”
However, the RBA said it “does not see a case for regulatory action at present”.
Google and Apple have adopted different approaches to payments access. Google has opened access for third-party app developers to the NFC chip on Android phones, while Apple’s NFC architecture is closed. Apple says this is necessary for security reasons.
Apple, which is not listed to appear before the committee next week, told it in a submission it does not ‘restrict’ or ‘limit’ banks from making NFC payments with their mobile banking applications and allows banks to initiate NFC payments directly from their iOS apps. However, it warned to “give control of NFC capabilities to individual banks would compromise the customer experience on Apple devices, reduce security and privacy, undermine choice and harm competition.”
Commonwealth Bank CEO Matt Comyn will appear before the committee on Tuesday, after the RBA’s head of payments Tony Richards appears on Monday. CBA said in its submission the mobile phone must “operate on a basis of competitive neutrality”.
“Regulation should prevent the development of monopolies or market dominance by a small number of players and ensure interoperability across mobile wallet ecosystems so that consumer can benefit from greater choice and innovation,” CBA said.
Banks have been concerned for several years that tech companies will win customer relationships by providing slicker digital experiences; last week, it was reported that Apple is working with Goldman Sachs in the US to develop more credit products.
Domestic debit scheme Eftpos is also concerned about how cards are provisioned into digital wallets. When debit cards are loaded into smartphones, they default to the networks operated by the international card schemes Visa and Mastercard, rather than Eftpos. On Google Pay, eftpos is not available on multi network debit cards at all. Eftpos told the committee it would support regulation “to ensure a level playing field”.
Apple told the committee it does not provide financial or payment services and its “only role has been to develop the technical architecture that can be used by licensed financial institutions to offer their consumers a safer and more secure way to pay with their credit, debit or prepaid cards”. Apple warned that “policies or regulations that seek to prescribe or dictate a technical approach are unnecessary and create severe unintended consequences, including compromising the security of the payments systems and stifling innovation”.
Banks have also told the joint committee that standards underpinning the digital economy need to be aligned and the coordination of payments policy needs to improve. Banks are worried about inconsistencies between the review of the Privacy Act, proposed digital identity legislation and the consumer data right and the PJC’s interest in payments comes as Treasury and the Reserve Bank are conducting their own payments system reviews while ASIC is reviewing the ePayments Code.
Banks have separately argued that technology giants should not be able to access bank customer data via the CDR without having to provide their own data as a quid pro quo. Banks are also warning the entry of the tech giants into payments could reduce incentives for banks to invest in payments infrastructure.
Meanwhile, the ACCC said this week it had delayed a decision on the merger of the three domestic payment schemes – which the banks argue is necessary to create scale to compete against the technology and card giants – by six weeks to mid-September.