Apple offers banks an olive branch

It’s a rare thing to see three of Australia’s big banks, so dominant in their home market, arguing for special dispensation from commercial laws to boost their bargaining position. But when it comes to dealing with Apple, the world’s largest company, Australia’s banks are mere minnows.

But with the combination of smartphone proliferation and tap-and-go technology set to revolutionise payments by allowing customers to use their phones like plastic cards, the banks see this case as a cudgel. They’re desperate to retain customer relationships at the point of sale and as commerce moves to mobiles.

This fight is an early battle for control of the digital wallet. Apple, banks, retailers and airlines all over the world are developing software to store digital versions of payment cards, rewards cards and boarding passes. When drivers’ licences, Medicare cards and transit passes are digitised, banks in Australia expect the adoption of wallets on mobile phones to surge.

The banks envision a future of multiple wallets but give themselves a decent chance of winning the market because their customer data should allow additional functionality to be built into bank digital wallets to make them the most appealing. But they won’t appeal at all if they can’t be used for tap-and-go payments – and for this the wallet needs access to the NFC antenna.

It would seem that all sides will now be searching for a compromise. Because the four applicant banks represent about 70 per cent of all cardholders in Australia, Apple is keen for a deal to deliver payments functionality to millions of its iPhone users.

Apple appeared to offer the banks an olive branch in its latest submission to the ACCC by suggesting bank proprietary wallets would be allowed to use the NFC – as long as the bank wallet is routed through Apple Pay’s security infrastructure. Apple maintains this is essential to protect its customers.

Apple and US bank CapitalOne have already gone down this route, which could provide a model for the Australian banks.


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