Retailers, payments association want banks granted negotiation rights with Apple

Australian retailer giant Coles, the Australian Payments Clearing Association (APCA), and the Australian Retailers Association (APA) have all expressed their support to allow some of Australia's largest banks to collectively negotiate with third-party mobile providers such as Apple on conditions relating to competition, best practice standards, and efficiency and transparency.

The Commonwealth Bank of Australia, Westpac Banking Corporation, National Australia Bank, and Bendigo and Adelaide Bank had put in their initial request with the Australian Competition and Consumer Commission (ACCC) at the end of July.

The main goals the banks want to achieve included ensuring there will be non-exclusive access to a mobile near-field communication (NFC) chip, which would open it up to opportunities for other third parties, such as retailer loyalty programs or transit companies, to access the wallet; standardised security standards across the mobile payment system; and price transparency for payment system transaction costs in Australia, which is in line with the Reserve Bank of Australia's policy.

However, the ACCC recently denied the banks the interim right to negotiate to allow them to commence negotiations on limited issues while the consumer watchdog considers the application for authorisation.

ACCC chairman Rod Sims said the watchdog needs more time to make a decision.

Coles has argued giving the banks the ability to negotiate with the likes of Apple will improve the experience for customers, as well as improve the transparency of costs related to credit card processing fees.

"We believe the ability to tailor solutions for customers and provide them with greater value should be the driver for customer choice and not a technical lockout that many consumers may not have realised would be imposed when they purchased their mobile device," the retailer said in its submission.

Similarly, the APCA has backed the banks, saying enabling the banks to negotiate will encourage greater innovation and enhance competition in the payments markets, and ultimately deliver benefits to consumers and merchants.

"We consider that the exclusivity and restrictions on access to platforms and functionality, by contrast, may tend to stifle innovation and competition," it said.

Meanwhile, peak retail body the ARA has argued that as long as Apple remains the only app that can use the iPhone's near-field communication functionality, innovation in mobile wallets and payments will be limited, pointing out that if Apple allowed the banks to put their mobile banking apps onto the iPhone, it would give consumers the option to choose.

Specifically, the ARA said if the banks were granted the right to negotiate some of the benefits would include seeing more innovation and investment in mobile payment and mobile wallet apps and services; more competition and choice for consumers; greater participation in mobile wallets and mobile payments by merchants, public transport operators, governments, and service providers; fairer and more transparent costs; and inclusive and relevant industry standards, particularly in relation to security.

"We would like to see all customers have a choice of mobile wallets and payment services using the mobile phone they already have and the bank debit and credit cards and loyalty cards they already use," the ARA wrote.

On the other hand, PayPal warned in its submission that when deciding on its draft decision, the ACCC should consider the definition of "mobile wallet", arguing the phrase used in the application put forward by the banks was "overly broad particularly in the context of our industry which is dynamic and constantly changing".

"If the Commission determines to grant relief in the nature requested in the Application, such measures should be carefully tailored," it said.

At the same time, PayPal said it believes the existing APCA Third Party Digital Wallet Security Industry Guidelines, which are currently only voluntary guidelines, should not be mandated for any of the third-party digital wallets.

"If it is intended that specific standards should be mandated in respect of 'Third Party Digital Wallets' then such standards should be created through an open, transparent, inclusive and consensus-based process that applies international best practice to the development of such standards," PayPal said.

The ACCC expects to release a draft decision by October 2016.