Banks, Apple fight to entrench their dominance in customers’ lives

In one corner is the largest company in the world, Apple. In the other sit three of Australia’s all-powerful banks, Commonwealth Bank, Westpac, National Australia Bank, and the country’s fifth biggest lender Bendigo and Adelaide Bank.

These corporations have more than $1 trillion in market value between them, and they’re fighting over access to the ubiquitous device that has made Apple such a superpower: the iPhone.

As well as being used by millions every day for phone calls, social media and internet access, the smart phone is tipped to play a critical role in how we spend money.

This prospect has unleashed a full-scale business brawl, as Apple and the banks slug it out to enmesh themselves even more deeply in consumers’ lives.

Apple will only allow banks to provide their customers with Apple Pay – which allows them to make tap-and-go payments using the iPhone – if they surrender some of their revenue, and agree to its terms.

ANZ has obtained a first-move advantage by striking a deal with Apple, but the other banks say to do so would restrict the choice of millions of consumers.

Refereeing this stoush is competition tsar Rod Sims. Later this month, the Australian Competition and Consumer Commission chairman is expected to issue a draft ruling on whether the banks can team up, and negotiate as one, as they have requested. This would involve them agreeing to boycott for up to three years, which under normal circumstances is illegal. Apple says the banks want to form a “cartel”.

So, what’s all the fuss about?

Here are the strategic and commercial prizes being fought over, and the policy issues raised in this high-stakes battle.

Fight over fees

Through Apple Pay, the tech giant takes a cut of the fees paid by credit card companies to banks, known as interchange fees.

It’s estimated the local banks collectively make $2 billion a year in revenue from interchange fees, which are about 0.5 per cent of a purchase on a Visa or Mastercard. Apple Pay would pinch some of this revenue from the banks, but it won’t say how much.

Banks say Apple typically takes 0.07 to 0.25 per cent of a transaction on Apple Pay overseas, but Apple’s submission to the ACCC does not say if this is true.

The banks want to form a negotiating bloc to apply pressure to change Apple’s tight contract conditions, even though it hasn’t done so for much larger banks in other countries.


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Source: Banks, Apple fight to entrench their dominance in customers’™ lives – Sydney Morning Herald