Australia hears case for open access to Apple NFC tech as QR codes will not do

Google says opening access to NFC technology will spur innovation while payments expert Lance Blockley argues QR code payments are not sufficient in an Australian context.

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Apple's alleged innovation-stifling practices where its NFC tech is concerned have now become the focus of an Australian Parliamentary committee, which on Monday heard the case for government intervention.

The only payment application that can access the near-field communication (NFC) interface on an iPhone is Apple Pay, whereas all the other interfaces on an iPhone like Bluetooth, Wi-Fi, and the camera, are open to any application. Apple has cited security as one of the reasons for holding back the tech.

"Host Card Emulation (HCE) is a less secure implementation, which was adopted by Android … Apple did not implement HCE because doing so would lead to less security on Apple devices," Apple said in response [PDF] to questions taken on notice from the Parliamentary Joint Committee on Corporations and Financial Services.

"Google likely selected this implementation because Android software is used in a variety of hardware devices offered from many different companies other than Google, and therefore had to select a software-centric solution, even though it is a less secure than a secure element-based implementation.

"Apple, which offers a tight integration between the operating system and its own hardware, is able to offer a fully integrated solution that is superior to Android's approach."

It also told the committee an HCE implementation would lead to a worse user experience for consumers.

Google in response said it does not believe there was any sort of security compromise in the HCE situation.

"Our payments apps are immensely secure … our HCE system, which is used by a very large number of banks all around the world, is audited directly by the banks … we would refute the suggestion our HCE environment is in any way insecure," Google president of partnerships in the EMEA region Diana Layfield told the committee on Monday afternoon.     

"I would argue the user experience on Google Pay is equal to that of Apple Pay."

Earlier this year, Germany, as part of its work on anti-money laundering, legislated the requirement for providers of technical infrastructures to grant access to those technical infrastructures to payment service providers. Apple and its NFC tech were captured by this legislation.

"It has been our experience that opening access to the NFC chip has made for substantial competition around the world. Substantial competition for us and substantial competition for the environment," Layfield said in response to whether Australia should adopt a similar legislative instrument.

"We believe it is a good thing and obviously we made that choice many years ago."

Lance Blockley, who helped the Commonwealth Bank, Westpac, the National Australia Bank, and Bendigo and Adelaide Bank with its joint application back in 2016 that sought access to Apple's NFC tech, said Apple holding back access has stifled innovation.

"In the application we made … the point was made that the quarantine around the NFC interface would hold back innovation and competition in the market because people would not develop new mobile wallets if they only could deploy them on half the handsets in Australia, the Android handsets, and they couldn't deploy them on Apple," Blockley told the committee earlier on Monday.

"There is a cost of accessing the NFC interface on an iPhone and Apple Pay levies a fee to the card issuers for accessing that interface, whereas the Android platform is free to the card issuers. So in that respect, that quarantine and fee for NFC access, one would have to believe would hold back competition, because it holds back the development of new innovative wallets."

Blockley told the committee that back when the banks' application got denied by the ACCC, there was one major supermarket that was developing a mobile wallet that would combine payment, loyalty points, and coupons, all into one application. He said this solution was never deployed due to it only being available on Android, given Apple's NFC constraints.

He did not say if it was Woolworths, which recently launched Wpay to compete head-to-head with some of the country's big banks.

He also pointed to an example in the United States, where Walmart developed their own wallet in lieu of accepting Apple or Android Pay.

"In order to have access to all phones, they use a QR code system which accesses the camera on the phone rather than the NFC interface," he explained.

But he would argue that's not overly appropriate in the Australian context, where the nation has been used as the poster child for "tap and go" payments.

"One has to remember that Australia was one of the first adopters of NFC contactless card payments, which became ubiquitous here, way before they became ubiquitous in any other country," he said. "And so NFC terminals at point of sale were much more ubiquitous here than they were in any other country and hence, the NFC interface became more valuable here than it did for example, initially in the United States, where there were very few contactless terminals."

He also pointed to current venue check-ins that many Australians are required to do in order to be COVID safe.

"I suspect that just about everybody on the committee would have used a QR code recently to check into a venue. And how would you compare the speed of that versus tap and go at a payment terminal? It is much slower and less convenient and therefore, the NFC contactless payment methodology, which is well known to all of the Australian population, is much easier for people to use than other systems," he said.

He also claimed that QR payments have popularity in China because they were yet to experience the speed of NFC.

Eftpos, and its wholly-owned subsidy Beem It, would argue QR codes are in fact a great approach for payments innovation in Australia.

On Monday, the company went live with its new national rewards platform, as part of its QR code utility roadmap, which hopes to soon enable discounts and offers, an all-in-one loyalty wallet, gamified social rewards, and promotions supporting local businesses.

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