SA Small Business Commissioner wants fees as part of bank negotiation with Apple

The South Australian Small Business Commissioner John Chapman has signalled he opposes giving some of Australia's big banks the authority to collectively negotiate with third-party mobile wallet providers, such as Apple, on conditions relating to competition, best practice standards, and efficiency and transparency.

The Commonwealth Bank of Australia, National Australia Bank, Westpac, and Bendigo and Adelaide have all lodged applications collectively requesting for the ACCC to grant initial interim authorisation within 28 days to allow them to commence negotiations on limited issues while the consumer watchdog considers the application for authorisation.

The main goals the banks want to achieve through negotiations include ensuring there will be non-exclusive access to a mobile near-field communication (NFC) chip, which would open up 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.

In his initial submission to the ACCC, Chapman has raised questions around why the banks have deliberately avoided the "thorny issue" of fee negotiations from their application, leaving fee negotiations up to individual banks to negotiate with wallet providers.

"To me, the applicants' reluctance to agitate the fees that they may need to pay to Apple (or how those fees might need to be recouped for their shareholders), is a telling indicator of the applicants' reluctance to shine any light on issues that may have the potential to cause them public discomfort," he said.

Chapman believes the banks, including ANZ -- currently the only bank out of the big four supporting Apple Pay in Australia -- will inevitably seek to recoup any fees or charges they give up to Apple, by recovering them from merchants, consumers, or both.

He said this inkling of how attached the banks are to fees and charges in their "relentless pursuit of profits" was exemplified when ANZ recently won a long-running class action battle on fees in the High Court that resulted in them able to continue charging customers late payment fees.

In turn, Chapman has urged for the ACCC to include fee negotiations as part of its final decision.

"Whilst the applicants have declined to include fee negotiations in its application, it is my submission that this is an extremely relevant matter which should properly be within the contemplation of the ACCC in its deliberation.

Chapman also pointed out the authorisation may potentially backfire on the banks as it is currently unclear whether Apple would even enter into negotiations if the ACCC granted them interim authorisation.

Additionally, Chapman raised doubts around the need for the urgent authorisation that would also allow the banks to put their mobile banking apps onto the iPhone, saying how the CBA, for instance, has already "identified and implemented a practicable and effective 'work around' solution" with its PayTag sticker, designed to be stuck on the back of iOS devices to enable customers to tap and pay.

"In my view this is simply a case whereby powerful banks are simply not used to having to accede to another, more powerful organisation -- Apple, a global company that has the smarts and the resources to be able to simply ignore the banks' demands," he said.

This was a similar argument Apple made in its submission to the ACCC accusing the banks' real motivation behind their request is to "maintain complete control over their customers", and force Apple and other third-party providers to accept their terms, which it believes would allow the banks to charge consumers that choose to use Apple Pay.

"The present application is only the latest tactic employed by these competing banks to blunt Apple's entry into the Australian market," it said.