Tuesday , March 28 2017

Is the debate over Mobile payments in Australia rotten to the core?

banks-vs-apple-v2

For a few months now we’ve been following the skirmish between Australia’s banking industry and mobile wallet vendors, Apple, Google and Samsung. That battle has narrowed and now only Apple is in the Banks sights.

It would be easy to not consider this an ‘Android’ story anymore, however, I still very much think it is. We’ve kept an eye on the correspondence of submissions flowing into the ACCC and while it mainly amounts to a bunch of lawyers throwing sand at each other in the play pit, it does help shed some light on what the tone of mobile payments in Australia will be moving forward.

The core of the conglomerate of banks requests is the ability to access and utilise the NFC chip on Apple devices – something they can already do on Android – in order to develop in-house payment apps. Additionally, the Banks do not want to pay the ‘skim’ Apple charges on each transaction, which currently is taken from the banks share.

Apple

Apple is definitely drawing the expected line in the sand with the ACCC, their latest submission from 26 October makes it clear, that even if a collaborative boycott is granted they will not negotiate on any of the terms.

Apple has actually used their unwillingness to negotiate as evidence that the banks will not be able to achieve the required ‘public benefit’ that is needed for the submission to be granted by the ACCC. In essence, Apple is saying to the ACCC even if you end up being swayed by the banks’ arguments we will not negotiate therefore any perceived public benefit from their endeavours will never be realised.

On one hand, you just have to admire the tenacity of a company using this subtle argument, on the other hand, I’m less than impressed with Apple’s arrogant and condescending approach. Apple maintains that only they are capable of delivering a safe and secure NFC application on Apple, and if banks wish to offer NFC mobile payments then they should adopt Apple Pay.

To my untrained mind this just feels anti-competitive: Apple has a strong device market share in Australia, and they are now leveraging that platform to pivot into dominance in another industry.

The Banks

The banks don’t get off scot-free here either, if the Australian Banks intentions are as they say to foster innovation and create a fairer more competitive mobile payment ecosystem in Australia then the banks need to start integrating Android Pay and Samsung Pay, as neither offering has any of the issues listed in the updated submissions.

Apple asserted in their latest filing that none of the major banks in the action had enabled Android Pay. This seems incorrect as Bendigo Bank is one of the primary signatories and they are now live with Android Pay. We also exclusively revealed this week that Westpac, who is a part of this action, is in testing for Android Pay and expected to launch later this year.

So from this, it seems that we may just be turning the tide of the battle for non-iOS consumers towards mobile payments. However, if the banks who are a part of this action, and the wider Australian Banking industry, want to be taken at their word then it seems logical that their only course of action now is to start to work with Google and or Samsung in the integration of their services into their respective payment platforms, as failure to do so would be to strengthen Apples claims and case.

I’m not naive enough to think that given the change the Australian Banks wouldn’t prefer to get NFC access on all devices and then not support any of the integrated Mobile Wallets such as Android Pay.  However, this may be one of the rare occasions where Apple’s anti-competitive nature may have done a larger good for the Australian banking sector.

Analysis

Unlike in the USA, tap-to-pay is nearly ubiquitous in Australia. That doesn’t mean everyone is using it, and that certainly doesn’t mean that payments via mobile wallets are a significant portion of the overall payments made. However, with the majority of the infrastructure already in place and more and more devices becoming NFC-enabled this proportion will continue to grow.

It’s this growth that Apple wants to skim and the Banks are afraid of losing. If Apple wins and the banks continue their boycott then mobile payment adoption will be slowed and the more tech literate of Apple’s customers will be disadvantaged. If Apple wins and the banks give in then I think we can expect credit card costs for merchants to increase so the banks can maintain their share. You can be assured that this cost will end up being worn by the consumer.

If the Banks win and Apple stands firm then its the same outcome as the first example above. However, if the banks win and Apple negotiates, we could just very well see both a rapid expansion of mobile payments in Australia without undue increase in costs to either business or consumers.

To be honest, I just don’t see that last outcome. Whilst Apple has a commanding market share with their faithful consumers, they will not back down from their traditionally strong armed negotiation tactics. Apple is desperately looking for alternate revenue streams (as are most large tech businesses) while they perceive they have the upper hand afforded to them by their customer base they will exploit that to diversify.

What does all of this mean for Android? Well, it should mean that if nothing else we see a few more financial institutions sign up to the platform, even if only as a negotiating tactic. And while I’d love to see Android Pay succeed on its merits, I settle for it just succeeding.

What do you think of the current state of the Mobile Wallet debate in Australia? Let us know below.

 
Source: ACCC.

Duncan Jaffrey   Associate

  • whispy_snippet

    Far out. Duncan has been such a boon for Ausdroid. The quality and quantity coming from his keyboard is astounding! Great analysis, Duncan! 👍

    On the subject of mobile payments, I have a question. Are the key benefits of Android Pay over a competing mobile payment app that 1. Android Pay allows you to “tap and pay” without actually opening the app itself and 2. Android Pay offers fingerprint recognition?

    I have Commonwealth Bank’s tap and pay feature on my Pixel. I don’t use it often but when I have it’s worked every time. However, the most annoying thing for me is having to open the app and punch in a password before I can use it. It just feels too clunky and it’s simply much quicker and easier to use my plastic card’s tap and pay function instead.

    • Marco Mui

      Having used ANZ’s, NAB’s, UBank’s mobile payment app, and Android Pay, I can say that the main advantage of Android Pay is the ability to have all of your cards regardless of the provider in one place (granted they are compatible banks). With Android Pay, you don’t need to open the app, or enter a password before payment, you just need to screen unlocked (or maybe that’s just a habit of mine?).

      Another advantage is that on the Pixel devices at least, you can long press the Android Pay app icon, and it will load up shortcuts so you can pick one of your 3 most recently added cards to pay with.

      • whispy_snippet

        Ah right. Thanks.

        Another question I had was whether the screen needs to be on to use Android Pay. So yeah, would be interested to see if that’s the case.

        • Duncan_J

          It is, screen on prevents skimming

          • whispy_snippet

            Fair enough. Makes sense.

    • Duncan_J

      Hey Whispy

      Thanks for the kind words.

      I was a happy CBA customer for more decades than I care to admit. I switched to ANZ as soon as I new the launch date and that CBA was refusing to implement Android Pay.

      The immediate benefits are the easy of use, for sub $100 payment I don’t even have to unlock the device. Compared to my CBA days it’s just awesome.

      Add to that the new 7.1 shortcuts for easy switching of cards (say visa to Amex) and fingerprint to unlock for over $100 payments and it’s sooooo easy to use.

      Android Pay is also tokinised so you’re less suitable to skimming and merchant hacks. (I’m not sure CBA is)

      There are a few other benefits over CBA and others as well but that’s the big ticket items for me.

      Cheers D

      • Jamie S

        I remember a long time ago suggesting Duncan should consider writing for Ausdroid, He said, no I don’t think I’d much good at that. How wrong he was. Congratulations mate, keep up the great work!

        • Duncan_J

          thanks Mate, appreciate the support,

  • This is definately a complex issue. I do believe however that the banks are in a losing situation.

    ANZ has seen a massive increase in customers over standard growth moving to them since they launched Apple Pay.

    Whether Android or iOS, if ANZ can utilise these systems to their advantage and offset any fee Apple, Google or Samsung charges into their account fees etc, this provides the bank with a world class wallet that they then have front row seats to help improve.

    It also means a better user experience for their customers, something many of these banks claim to provide but rarely deliver.

    I personally would trust the security of a wallet system used and abused globally like Apple & Google’s, over anything a small bank (in the scheme of things) could develop themselves.

    • whispy_snippet

      Yeah, I pretty much agree.

    • Duncan_J

      I respect the banks desire to offer a 1st party mobile payment solution on all platforms, as long as they respect my right to choose to use someones elses.

      • chris

        Exactly… Well said. If the bank wants to use Apple or Google pay then they pay for it but if they want to create their own system they should have access to the API to do so.
        Apple is doing what it always does and for some reason they get away with it. If Microsoft did this then there would be multi-billion dollar fines, Apple does it and they are applauded.
        If there were 100 different platforms out there then yes apple can say they use it as a benefit of their product but when there are really only 2 platforms out there for a majority of devices then it no longer applies.

    • who

      Got a source on ANZ getting a massive increase in customers from Apple pay?

      • chris

        he makes his facts up

        • Sorry did I do something to offend you?

          I’ve posted a list of links (you can google them yourself) of ANZ claiming increased credit card signups since Apple Pay launch. Disqus shows this needs to be approved before it will show.

          Here’s a quote from Matt Boss at the ANZ:
          “We’ve seen volumes come up quite a bit. We’ve also seen engagement of passive or disengaged customers come up. Last month, we had our highest net customer growth we’ve had in the past several years … so there’s ­really good flows … and real habit- forming behaviour take place with our customers.”

          Another quote:
          “ANZ chief executive Shayne Elliott said at the bank’s interim results last week that online credit card applications were up 20 per cent since the deal with Apple was announced on April 28.”

          • Duncan_J

            looks like it’s now approved, great links mate

  • Fred

    Well, general principal should be that no electronics company should be able to use control of the electronics to competitive advantage in services. So no tied app store exclusivity, no ‘terms’ forcing others to include X in exchange for Y, and no preventing others from access to hardware that the electronics company has.

    That would open the market for some real, free, competition; and itunes wouldn’t exist.

    And that means, no skim. You want to make money, you have to work for it.

    On the other side, the banks shouldn’t be creating exclusive apps that only work with them. One, well tested and secure, app that can do all of them should be mandated, with compatibility across the various platforms. And again, no skim.

    Personally however, I’m not keen on the whole idea of combining payment card and phone anyway. You don’t gain much; except that hackers and government spying now have an easy route to exploits.

  • One other point I’ll make on Google and Apples behalf; the banks have no “right” to get access to the NFC chip in a hardware device designed and manufactured by another company.

    The banks have alternate ability to provide contactless payment – NFC cards, NFC stickers etc – Apple & Google don’t make these.

    IMHO if they want to use someone else’s hardware; pay the price of entry, or make your own phone or device.

    • chris

      Sorry but no. The dominance of Android and iOS means it is an anticompetitive move. Just like Microsoft gets into trouble for bundling its browser.
      Apple and Google should provide an API to allow developers to use the NFC system

      • I’ll leave it to the lawyers to decide if it’s anticompetitive.

        My personal opinion (which obviously differs from yours – but I would never claim that you’re wrong!) is that alternatives are available for the function; which is contactless payment.

        Also Google do provide an API – so a call of anticompetitive can only be pointed at Apple.

        The browser comparison is interesting to consider but Apple does not have a considerable (ie 80-90%) market share advantage unlike Microsoft at the time of that judgement.

        Regards,
        Shane.

        • Wayno

          I agree. Like it or not, the banks have no automatic righ to the NFC chip. That said, Apple is showing it’s true colours. Of course they are on this earth to make money but surely Apple Pay should be seen as an incentive to buy an Apple device? Apparently not.

          I actually changed banks to the CBA last year (or the year before? Can’t remember) when they introduced their contactless payment system. And on the whole it’s great. I don’t use it for every payment but it’s handy when say I fill up the car and go to the kiosk only to realise my wallet is in my jacket hanging in the car. Queue the phone to save the day 😀

        • chris

          It is a given in today’s market that nothing Apple does is anticompetitive, they do what they want and get away with it nearly all the time. We all know that Google does provide that API, this is in essence what the story is about and why Google was removed. Apple does not and they should.
          The two platforms cover nearly the entire market and both Apple and Google are working hard to make mobile payments the default method or a very large percentage of transactions, by having Apple lock up their NFC chip it is blocking competition, their arguments are moot when you consider the app needs to go through the app store approval where those issues can be resolved. In the end Apple just wants more money.

          Personally I think the reality is the banks just want to maintain their profits which is always the case, why bother creating your own system when for a small fee on a transaction it is all there and ready / tested to go. We all know however the greed that is Apple.

          As to the browser comparison, it is easy enough to install another browser, takes minutes and apart from some annoyance.
          Sorry when it comes to browser market share IE is behind Chrome.
          Browser as of now
          Total Market ShareChrome54.99%Microsoft Internet Explorer23.13%Firefox11.14%Microsoft Edge 5.26%

          My point there is everyone is happy to scream at Microsoft and even Google for it but not Apple and their practices. They are the largest valued company in the world but yet get away with robbery.

  • Andrew

    One reason I prefer using the ANZ App on Android is that I am able to avoid my transactions being visible to Google (if Android Pay) or Apple (if Apple Pay). Since my credit card transactions are already visible to ANZ and Visa Mastercard it is enough that those organisation see all my transactions. I don’t want to add yet another organisation.

    • Duncan_J

      And for some people that’s a valid concern, just become some of us don’t mind feeding info into “the machine” doesn’t mean everyone is happy to do so.

  • Duncan_J

    Thanks Ducca
    I’ve started walking around work with nothing but my phone, I know I can rely on it for payments where I know it works, i may not do the same thing in the city and wouldn’t outside Australia.

  • noyesclt2

    The Aussie banks are not in this battle for “consumer choice” .. they are in it for control. Would banks open up to let apple sell music, phones and pre-paid cards in a bank branch?

    Consumers don’t care that technology governing how a card is presented (ex bank card is in an Apple wallet vs a Bank mobile application). They just want it to work. Think about consumer experience.. when you buy an app or Uber ride it is just a touch ID with your card stored with Apple. At the POS it should be the same. Apple has invested substantially in touch ID, security, software, hardware, brand to make Apple Pay work. Is it supposed to unbundle all of this for free? to what benefit? if consumers want to use bank apps to pay they have an option.. Android (HCE). But most consumers DO NOT pick a phone based upon payments or control.. but INTEGRATED VALUE. Bank value propositions are isolated to banking products only. Banks want to own the mobile channel.. but this quest is NOT altruistic.. it is not about choice.

    • Duncan_J

      If you read our previous coverage I think you’ll find me mostly agree, however as they are applying to the ACCC on the grounds of there being a public benefit it may well cause them to actually start acting in a way that does benefit consumers.

      If banks want to have a NFC mobile app that’s fine with me (I’ve done the sticker thing it’s very much a half measure) as long as they give me access to the big platforms as well.

      As I said not naive.

  • I just want the CBA Android app to support fingerprint login/pay. Great article btw.

  • tony

    After being in China for a month I see just how outdated we are in Australia and how the banks have to much influence. We need an Alipay system here in Australia with the ability to load money into an alternative and widely accepted provider

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