​Banking cartel holds firm on Apple appeal being solely about NFC access

The group of banks has narrowed its ACCC request to focus solely on gaining access to the iPhone's NFC technology.

The Commonwealth Bank of Australia (CBA), the National Australia Bank (NAB), Westpac, and Bendigo and Adelaide Bank have narrowed its joint application to the Australian Competition and Consumer Commission (ACCC) to solely focus on open access to iPhone's near-field communication (NFC) technology, accusing Apple of refusing to do anything any other way than "Apple's way".

The banks have been seeking regulatory approval since mid-last year to collectively negotiate with third-party mobile providers such as Apple on conditions relating to competition, best practice standards, and efficiency.

Throughout the process, the banks have claimed they want access to the NFC controller in iPhones, as Apple currently does not allow any other entity direct access. The group has been arguing that access would enable them to offer their own integrated digital wallets to iPhone customers in competition with Apple's digital wallet without using Apple Pay -- which is what Apple wants to avoid.

In its latest response [PDF], the banking cartel has reiterated its long-held opinion that the public will benefit if Apple is forced to hand over its NFC hardware, highlighting it would increase competition and consumer choice in digital wallets in Australia, increase innovation and investment in digital wallets and other mobile applications using NFC technology, provide greater consumer confidence leading to increased adoption of mobile payment technology in Australia, and provide cost-based benefits for consumers.

"NFC access is required to enable real choice and real competition for consumers, and to facilitate innovation and investment in the digital wallets available to Australians. All customers benefit from real competition," the submission said.

"The applicants flatly reject Apple's unsupported assertions that the application is about an objection to the fees that Apple wishes to impose, rather than NFC access.

"Apple's conspiracy theories about 'Trojan horse fees' are similarly dismissed by the applicants as fantasy.

"To make this point abundantly clear, the applicants are willing to limit collective negotiation to NFC access alone -- ie, the ability to collectively negotiate for the removal of the pass-through restriction will be taken off the table."

The banks' comments come after Apple argued in its submission to the ACCC last week that the collective application from the banks is not about access to the iPhone's NFC technology; rather it is an attempt to avoid paying the fees associated with using Apple Pay. Apple noted that it "will not, and cannot, agree to the terms sought by the banks".

The latest submission from both the banking cartel and Apple is in response to a draft determination handed down by the ACCC in November that moved to deny the banks collective bargaining rights against the iPhone maker.

"This is currently a finely balanced decision. The ACCC is not currently satisfied that the likely benefits from the proposed conduct outweigh the likely detriments," ACCC chairman Rod Sims said at the time.

"While the ACCC accepts that the opportunity for the banks to collectively negotiate and boycott would place them in a better bargaining position with Apple, the benefits are currently uncertain and may be limited."

In its response, the banks claim the draft determination fails to take into account the public benefit that would result from an increase in competition in mobile payment services, saying the competition would provide a material increase in choice for consumers.

"It is not just that there will be more mobile payment services available in the market, the competitive tension between mobile payment services will also promote innovation and differentiation that can be used to further differentiate mobile wallets," the submission reads.

"For Apple to suggest that mobile payment services are not open to differentiation or improvement is short-sighted and reflects a failure to imagine any way of doing things other than Apple's way."

Apple believes that this argument is merely lip service, given the banks currently have embedded NFC radio access on Android devices that Apple said they have not utilised.

The banks believe that there is already substantial competitive tension from Australia and New Zealand Banking Group (ANZ), American Express, and the 37 other institutions who currently offer Apple Pay. If NFC access on the iPhone is granted, the banks said, then competition between mobile wallet apps will be increased, in both card payment product features and promotions, and in non-payment features and consumer offerings.

"There are no public benefits to providing the applicant banks embedded NFC radio access," Apple said in its latest submission.

"The only benefit that would accrue to the banks in that case is a purely private benefit where they would be allowed to continue to free-ride on the significant investments made by Apple in its devices, iOS platform, and Apple Store infrastructure, and specifically in this case on the underlying technology installed on Apple devices to facilitate NFC payments without paying any fees for transactions processed via Apple Pay."

According to the tech giant, embedded NFC access would not lead to an overall improved user experience, and the proposed collective bargaining conduct will not achieve any of the public benefits claimed by the applicant banks.

In addition, Apple said it is concerned that the banks are using the long-drawn-out authorisation process as a device to delay the further expansion of Apple Pay in Australia, a practice the Californian giant believes is not only directly impacting the 70 percent of cardholders in Australia that are controlled by the banks but also the smaller card issuers who already, or could in the future, rely upon Apple Pay as a means of securing a digital presence in competition with the big banks.

"The application seeks permission to jointly negotiate with Apple; this is not an attempt to delay Apple Pay from entering the Australian market. The applicants expect that Apple Pay would be offered to their customers alongside open access to the NFC function. Any delay or frustration will be as a result of Apple refusing to negotiate," the banks said in response.

"Apple is not a bank or a credit card scheme, and Apple cannot on their own complete a mobile payment. Nor are the applicants manufacturers of mobile phones -- both parties need each other to bring strong mobile payment offerings to the market."

In its latest submission, the banks held firm that NFC access would create opportunities to invest in NFC capabilities that do not exist without access. Particularly in a relatively small market like Australia, the banks said that larger addressable market provided by NFC access on the iPhone platform increases the incentives to invest, and would reduce the cost and risk of failure and enhance the likely chances of success.