Last week, the Australian Competition and Consumer Commission (ACCC) issued a draft determination on the issue of banks' access to Apple Pay, a mobile payment and digital wallet servcie.
Bendigo and Adelaide Bank Ltd (ASX: BEN), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank Ltd. (ASX: NAB), and Westpac Banking Corp (ASX: WBC) were denied authorisation to collectively bargain with and boycott Apple over the use of its Apple Pay.
Back in late July each of the above banks submitted that collective bargaining with Apple should be allowed by the ACCC over attempts by the banks to:
- Gain access to Apple's Near-Field Communication (NFC) controller in iPhones,
- Gain reasonable access to the App store, and
- Pass on all fees that Apple charges the banks for the use of its digital wallet
If you're a customer of Australia and New Zealand Banking Group (ASX: ANZ) and you own an iPhone, you won't be surprised that ANZ didn't include themselves in the ACCC submission after ANZ had already agreed terms with Apple to give up some of its interchange fees and offer this product to their customers.
The banks argued that their approach would lead to:
- increased competition and consumer choice in digital wallets in Australia,
- increased innovation and investment in digital wallets using NFC technology,
- greater consumer confidence leading to increased adoption of mobile payment technology in Australia, and
- increased pricing efficiency of digital wallets.
However, the ACCC chairman Mr Rod Sims disagreed:
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.
Additionally, the ACCC is concerned that if the banks got their way, the competitive tension between the banks individually negotiating with Apple would be reduced which would have a flow-on effect more generally to bank competition in the supply of mobile payment services for iPhones.
From a consumer's point-of-view, it was also disappointing to read in the financial press that none of the applicant banks had been conducting any serious negotiations with Apple over the past two years to eventually offer Apply Pay to their customers.
Where to from here then?
As I indicated above, last week's determination by the ACCC is draft only with a final decision expected by March 2017.
If you're an iPhone owner and you're a customer of any of the above banks, you still have an opportunity to provide your own submission on why you think the banks' or Apple's position is unjustified.
Foolish takeaway
In the overall scheme of things, the issue of access fees paid to Apple is immaterial to the overall level of profits earned by the banks.
Perhaps for this reason, ANZ had the foresight to go it alone and offer Apple Pay to their customers. It also offers ANZ an interesting point of differentiation between itself and the other big banks.
From an investment point of view though, I maintain a negative stance on the banks at current prices which I've written about here and here, as I think there are better investment opportunities elsewhere.
