Australian banks dismiss Android NFC past in Apple Pay negotiations

The baby, the bathwater, the toys, and the cot have all been thrown out in an extraordinary missive from the Australian banks looking to access the NFC element within Apple devices.
Written by Chris Duckett, Contributor

Sorry Australians with an Android phone, but you simply don't spend enough money to make it worthwhile to develop NFC solutions for you -- that would be one way to sum up the latest joint submission from CBA, NAB, Westpac, and Bendigo Bank to seek approval from the Australian Competition and Consumer Commission (ACCC) to collectively negotiate with Apple to gain access to the NFC element within iPhones.

The joint submission [PDF] from the banks is a response to those that have gone before it from Apple and the general public that have called on the ACCC to stare down the banks.

Core to the banks' argument is the idea that the public will benefit if Apple is made to acquiesce and hand over access to its precious NFC hardware.

"Without access to the iPhone's NFC functionality, there simply will not be the same incentives and ability to innovate for the benefit of Australian customers on either the iPhone platform or other platforms," the submission from the banks concludes.

In their spray, the banks correctly point out that even though Android has more users in Australia, those on the Apple platform spend more, and when you get right down to it, they are the consumers that the banks really want to go after.

"Access to the NFC functionality on the Android platform alone cannot generate the same choice, competition, efficiencies, and innovation in integrated mobile wallets in Australia," they state.

Banks chasing a buck shouldn't surprise anyone, but it is the attempted historic revisionism that makes this submission so extraordinary.

"Without access to the iPhone's NFC functionality, the applicants are left to explain why an iPhone customer with exactly the same accounts or transaction volumes as the Android customer cannot be given the choice of another wallet alongside Apple Pay, adding to costs and discouraging investment in the Android platform."

Or, in other words, the banks are apparently incapable of explaining the situation that they created themselves over the past half decade, as they rushed to add NFC payment functionality where they could.

The old Android fragmentation pony also gets saddled up and taken around the track for a couple of laps, with the banks claiming it reduces the addressable market.

"A fragmented customer experience across platforms confuses the customer offering (which relies on simplicity for adoption)," the banks state. "It also adds to the costs of investing to develop mobile payment technology for consumers and the consumer engagement required to explain the product and its additional value beyond a 'tap and go' payment, and provide confidence that consumers can trust the product with their money."

It's a good thing, then, that the Commonwealth Bank of Australia did not roll out new functionality three years ago that restricted NFC payments to Samsung S4 and S5 devices, and only extended it to all Android devices in March 2015 -- that would be been oppressively bad for a company taking home almost AU$9 billion in profits to have to explain that situation to its users.

Presumably, we are all meant to forget the boasting as Australia's largest consumer bank not only went ahead and segmented customers by mobile operating system, but also further divided it down to a collection of devices offered by a single brand.

That was all a bad dream, if the latest submission is to be believed.

Try as they might to erase it from history, the banks have been fighting amongst themselves in recent years in the NFC payments space, and it is not something the ACCC is likely to forget.

It is a shame that the banks have chosen to attempt to pull the wool over the eyes of the ACCC, because they otherwise make some decent points that should be discussed, at the very least.

For instance, that the time to negotiate with Apple is before there is a critical mass of banks using Apple Pay, and that collective action is still effective; whether from a competition perspective, the banks should be reliant on a third party to provide functionality to their most lucrative segment that can unilaterally raise the price on them; and whether the banks live up to their promises to ensure they could handle the NFC element in a secure fashion.

It's far from a winning argument from the banks, especially when they claim there is latent demand for banks to offer their own payment solutions.

"73 percent of iPhone users would prefer an app that allows payments to be made from a mobile phone using a credit or debit card registered to the app to be provided by a financial institution rather than a technology company whose products they use (6 percent) or a card scheme (21 percent)," the banks said. "This iPhone user percentage is reflective of the preference among all consumers in the sample regardless of the handset."

Because there is a lack of excitement in the latest offerings of mobile handsets from all major makers, there has never been a better time for the banks to try to lure customers onto their preferred platforms.

The banks claim it is hard to move customers between mobile operating systems, but which is the easier process: Changing from iOS to Android, or moving a mortgage and transaction accounts from one financial institution to another?

For centuries, the banks have competed against each other to do the latter, so it isn't too much to ask them to attempt to do the former.

"What has been achieved on the Android platform to date (where access to the NFC function is allowed) is not indicative of the extent of benefits could be achieved with access to the iPhone's NFC -- ie, it is a mistake to consider that the relevant factual is represented by what is now available on Android," the submission said.

"Mobile wallet technology and uptake are in their early days, and the potential for innovation would be far greater, with access a broader customer base including the lucrative iPhone customer segment."

If the ACCC prevents the banks' wishes to collectively bargain with Cupertino, they should go ahead and show the fabled innovation they speak of in this submission. Give Australians a platform that can handle multiple cards, public transport, loyalty programs, and whatever else the banks think can be done, in a seamless fashion.

Show us the innovation that would be better for the public, because at the moment, the phone-based wallet offers little over the traditional wallet crammed with contactless cards.

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