Last week’s announcement by the ACCC to block a number of banks from acting as a block in negotiating with Apple over access to Apple Pay was hardly a surprise, given previous comments by the business regulator. But it says a lot about some of the wealthiest and most powerful businesses in the country that they felt the need to get help from the regulator.
Lots of ink and pixels have been and will be spilt over this decision. Is it right that Apple should block banks for accessing the NFC radio in their phones? Does Apple’s large market share in Australia (over 45%) factor in? Should a collective of the most powerful corporate citizens be able to work together to force a market outcome? Does Apple’s track record for offshoring their cash in order to minimise their tax payments matter?
All are interesting and emotive questions. But I think the big issue is that the banks have had many years to get their act together over mobile payments. They have tried with some half-arsed attempts involving crappy stickers but they have not invested in any serious way.
Apple Pay is a software invention that combines biometric security, a Secure Element chip and an NFC radio. It only works because of the wide adoption of the EMV standard for contactless payments – something the banks have invested in and reaped the benefit of with all the tap-and-go cards we now hold.
The failure of the banks to get their own payment app working isn’t Apple’s fault. It’s a failure to invest in the right technology. And, in my view seeking help from a market regulator is the equivalent of your favourite sports team asking for the game’s administrators to let them get access to the opposition’s best players because they can’t score as well as the other team.
All our large banks report massive profits each quarter. And at every turn they charge customers fees and maintain high interest rates on credit cards in order to protect those profits for their shareholders.
But that “protect the profit” attitude has resulted in a failure to invest in the right technology.
The payments industry is ripe for fintech startups. If we’ve learned anything from the application of blockchain in the evolution of cryptocurrency and the development of Android Pay, Samsung Pay and Apple Pay, it’s that the real innovations in payments are not coming from established players in the finance business.
The stoush between Apple and the Australian banks is important as it represents the start of banks losing their grip over a piece of the market they believed was untouchable. And the ACCC’s decision should be an encouragement to innovators looking to disrupt a market that is in desperate need for change.