The company said Apple Pay had been specifically designed to be pro-competitive by allowing smaller banks and fintechs more access, and customers the choice of what card they wished to use. It suggested this increase in competition was a key reason banks, led by CBA, are against it.
Apple Pay is used in 75 countries, with 10,000 banks and other card issuers using the wallet. Australian banks are paying Apple more than $110 million in annual fees to allow the iPhone to process their card payments, and that number is rising.
‘Safer way to pay’
Apple’s submission added that the company creates no financial and operational risk to banks and described how Apple Pay plays a peripheral and limited role in the payments system.
“Apple’s only role has been to develop the technical architecture that can be used by licensed financial institutions to offer their consumers a safer and more secure way to pay with their cards,” the submission to Treasury reads.
The new regulations – which, if passed, will broaden the RBA’s and the Treasurer’s powers by subjecting big tech to a licensing regime – would potentially allow the central bank to intervene in how Apple manages access to its digital wallet. Treasury explicitly includes providers of digital wallets as “participants” in the payment systems. But Apple submits that there has been “no demonstrated case” for any intervention.
Its submission is the latest foray in an acrimonious, multi-year spat between the world’s largest company and Australia’s largest bank.
CBA told the Treasury in its submission the new licensing regime must “not encourage free riders and loopholes that could be disproportionately exploited by overseas technology companies” and argued “regulators should have the ability to regulate all participants that form part of the payments ecosystem”. In earlier parliamentary submissions, the bank warned large technology companies could lead to a “hollowing out of domestic industry”.
But Apple says it does not provide financial services in Australia, although it does in the United States, meaning regulation would be unwarranted. “Apple does not issue debit, credit or prepaid cards in Australia, nor does Apple acquire, process, authorise or execute transactions,” it said.
“Apple is neither an issuer nor an acquirer for existing regulated payments systems, and at no point does Apple handle a payer’s money or have any control over any payments or transfer of value. Apple Pay does not store any details of a cardholder’s existing debit, credit or prepaid card and does not have access to a user’s account to determine whether funds are available or store any value or funds.”
Financial regulation must focus on actual risks, be proportionate, and be tailored to the actual role a system plays, it said, while intervention must be assessed against net public benefits.
It warned the government’s planned legislation risks increasing barriers to entry in the sector and contains definitions that lack clarity. This could create unintended consequences, like capturing retailers such as Woolworth’s, given its rewards program is initiated via QR code scans; third-party ATMs operators; and Google, whose Chrome autofill feature stores card details and populates them on screens.
“Regulating functions which only have an indirect and limited role is contrary to the objective of promoting greater competition, diversity and innovation with the payment ecosystem,” Apple’s submission adds.
