Apple claims giving Australian banks negotiation rights will undermine customer security

Apple has warned some of Australia's big banks that it will not be open to negotiation if they are granted authorisation to collectively bargain with the tech giant.
Written by Aimee Chanthadavong, Contributor

Apple maintains a firm stance that it will not agree to the terms of negotiating with some of Australia's largest banks on conditions relating to competition, best practice standards, and efficiency and transparency, believing it would "undermine the availability, security, and privacy" its customers expect when using Apple devices to make payments.

The tech giant has made a second submission to the Australian Competition and Consumer Commission (ACCC) further detailing reasons why the consumer watchdog should not grant authorisation to the Commonwealth Bank of Australia, National Australia Bank, Westpac, and Bendigo and Adelaide Bank to join forces to collectively negotiate with third-party mobile wallet providers, such as Apple.

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.

"If granted, the authorisation would harm consumers, lessen competition, and reduce innovation in the banking sector, of which the payments system is a core part. It would also create a troubling precedent. Apple expects that banks and third-party mobile wallet providers will continue innovating and developing new and better solutions," Apple wrote, hitting back at the banks.

Apple pointed out that the banks are wrong to perceive the company as a threat, suggesting it should be seen rather as an example of competition and innovation. The company added that it does not restrict partners, particularly when it comes to developing their own iOS apps.

It also argued that giving the banks authorisation to collectively bargain will put a "brake on new competition", as it would stifle incentives for existing players to develop new solutions that compete against Apple Pay.

Apple further suggested that the banks want authorisation to "control the direction and pace of innovation and advantage their own mobile wallets".

On the point of giving the banks access to its NFC antenna in Apple devices, Apple said such access would not be open to negotiation with any bank.

"Apple designs its products to provide very secure experiences, especially where payments are concerned. Apple has been able to provide the required level of security with tight integration of hardware, software, and services such as Apple Pay," it said.

"Apple does not provide banks access to the NFC radio because doing so would undermine the security our customers expect when using Apple devices to make payments."

Apple highlighted that if the banks are given open access to their NFC radios like Android devices, it would make its platform "susceptible to third-party attacks that can compromise the customer's card information".

At the same time, Apple said not giving the banks access to its NFC antenna would not prevent the banks from providing alternative payment technologies for their customers, pointing out existing examples such as the Commonwealth Bank's NFC sticker and Bendigo Bank's Redy wallet.

In addressing the banks' argument on wanting to standardise security standards across the mobile payment system, Apple said it opposes adhering to guidelines such as the one the Australian Payments Clearing Association (APCA) had sought to introduce at the end of last year as part of the Third Party Digital Wallet Security Code.

It pointed out that given the APCA is an industry group made up of each bank applying for authorisation, it would place the banks in a "position to control and dictate a set of security standards and requirements with which third-party mobile wallets would need to comply", while they would not.

"It risks undermining the high level of privacy and security that Apple currently offers customers, by (for example) potentially obliging Apple to start collecting, storing, and sharing end-user data, as dictated by the banks," Apple wrote.

"A 'one size fits all' security protocol dictated by the applicant banks would also remove the incentive for individual competing mobile wallet providers to develop more innovative solutions to distinguish themselves from other providers."

Another point Apple addressed in its submission was the fees banks are charged for using Apple Pay, assuring it maintains a "relatively consistent" fee structure globally and saying the costs incurred by the banks will be offset by the opportunity the banks would receive as a result of being able to offer Apple Pay to customers.

A spokesperson on behalf of the banks responded to Apple's latest submission by saying the banks will continue the ACCC process to seek authorisation for collective negotiations with Apple Pay. They are seeking this on the grounds that they believe the outcome would benefit consumers in terms of allowing competition and choice, and maintaining security and transparency in payments, despite Apple's obvious intention to not address the issues raised in individual negotiations with any Australian banks.

"Apple's submission to the ACCC makes it clear that Apple does not want to give iPhone users the ability to choose an integrated third party wallet of their own preference. Unlike users of Samsung and Android, Apple is blocking access to the NFC function and wants to leave iPhone users with no choice but to use Apple Pay," the spokesperson said.

"Their submission to the ACCC claims this lack of choice is in the best interest of Australian consumers. The applicants disagree. Instead, they want to negotiate with Apple so there is an opportunity to offer other integrated wallets alongside Apple Pay. They also want to make sure Australian consumers benefit from the same high standards of security and transparency no matter which mobile wallet they choose."

The banks had requested for the ACCC to grant interim authorisation within 28 days of their initial request made on July 27 to allow them to commence negotiations on limited issues while the consumer watchdog considers the application for authorisation.

However, the ACCC 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.

In its first submission, Apple accused the banks of being control freaks, saying at the time that if the request were granted, it "would harm consumers, lead to less competition and less innovation, and create a troubling precedent".

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

Apple also accused the banks of having a "limited understanding" of Apple Pay.

"The applicants rely on innuendo and misstatements to support their application. Most have little direct insight into Apple Pay or Apple's terms (case in point, one applicant bank has refused to even enter into a confidentiality agreement with Apple to allow for preliminary discussions about the terms under which it would participate in Apple Pay)," it said.

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