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Why CBA, RBA and ACCC might stop you using Apple Pay

·4-min read
The icons for Google Pay and Apple Pay being displayed on phone screens
Aussie institutions have voived concers over multinational tech companies having a hold on Australia's tap-to-pay market (Source: Getty)

A parliamentary committee has heard of concerns around the use of payment apps like Apple Pay, Google Pay and Samsung Pay.

Aussie institutions have voiced their concerns that tap-to-pay apps are either taking over the market or avoiding necessary regulation.

Commonwealth Bank (CBA.AX) CEO Matt Comyn hit out at Apple, while RBA head of payments policy Anthony Richards said the central bank has been considering tougher regulation in the sector.

Why CBA is concerned about Apple Pay

Comyn took aim at Apple directly telling the committee the US tech company was hindering competition in Australia.

“The thought that a single provider can have 80 per cent market share in an individual market is usually cause for concern,” Comyn said.

“I’d be the first to say they make fantastic products, but this company, its market cap is double Australia’s GDP. And certainly in the context of tax receipts, makes very little contribution to Australian government receipts.”

Comyn said Apple directs everything through the Apple Pay wallet which limits other players in the tap-to-pay game.

“It means that there can be no competing wallets on the iOS operating system. It hinders the ability of new entrants to be able to come into market to develop competing wallets,” he said.

“From a competition perspective, when something becomes an essential, Apple Pay has probably become largely essential for financial institutions, and it’s highly unlikely that anyone can compete with Apple’s position with an 80 per cent share at the moment.”

On the flip side Comyn praised Google for having much more open architecture allowing for a more open market.

“The issue of digital wallets is an excellent example of how technology is challenging the traditional way we think of financial systems,” Comyn said.

“Strong competition will be crucial to ensure the benefits that result in better customer outcomes.”

Why the RBA is concerned about tap-to-pay

Richards said the bank does not yet have the powers to cover mobile payments but is watching the area closely.

“If we thought there were major issues here, we would for the time being, have to go to the ACCC,” he said.

“But we’re indicating that it’s very much a live issue and it could be a case before too long.”

The RBA made a submission to the committee saying it was concerned about fees being charged for the use of digital wallets.

“While technology platforms have the potential to improve the efficiency and security of the payments system by providing innovative new services, they can also introduce new direct and indirect costs,” the RBA said.

“Accordingly, it will be important for policymakers to assess whether there is an appropriate balance between the costs and benefits of these services.”

The RBA warned that as digital wallets become more widely used, wallet providers could obtain substantial market power which it said could have implications for competition.

It also raised concerns around the lack of competition in the market pointing to the likes of Apple Pay, Google Pay and Samsung Pay dominating the Aussie market.

“The expansion of large technology platforms – sometimes referred to as ‘bigtechs’ – into payments and other financial services markets is presenting new competition challenges for policymakers and regulators,” the RBA said.

“These platforms have very large user bases and benefit from strong network effects, which is likely to result in them being in a strong negotiation position with payments system participants and can make it difficult for smaller firms to compete.”

Why the ACCC is concerned about digital wallets

ACCC executive general manager Marcus Bezzi also voiced his concerns to the committee about these major multinational tech companies favouring their own products to consumers.

“In the digital economy area, one of the concerns that's been expressed internationally is self preferencing by the big digital companies,” Bezzi said.

“If they are operating in a market and giving themselves an advantage or discriminating against the people that they are competing against, that can have a very serious effect on competition.”

In it’s submission the ACCC specifically called out Apple for favouring its own products because it has complete control over its own operating systems.

“Apple, in particular, as the sole device manufacturer and operating system provider for the iOS ecosystem, currently has complete discretion over when and how it opens its systems to third parties,” the ACCC said.

“In contrast, Android is an open source operating system, which means that in general third- party developers do not need to be granted access to certain functionality in the same way they do for iOS.”

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