Payments

Latest From Apple Pay: The Mobile Payments Service Faces Hurdles in Australia, Also Joins NFC Forum

Apple Pay’s entrance into Australian market is in trouble as the tech giant is having some dispute with Australia’s big four banks over interchange fee.

On July 14, 2015, contactless payment system Apple Pay arrived in the UK and is now available in shops supporting Apple Pay and across the London transport network. This is the first time Apple Pay worked anywhere outside the US.

According to a report by Australian bank Westpac, contactless payments via mobile will reach a value of $3 billion in Australia by 2015. In Australia, mobile-based contactless payments have accounted for 60% of all debit card transactions in the past 12 months. After the US and the UK, Apple was planning to expand its horizon by entering the highly developed banking sector of Australia. However, these plans are on hold as the company has not been able to resolve the issue with Australian Banks.

Let us look at the issue being faced by Apple in Australia. Apple Pay is based on contactless reader technology and allows users to use their phone or Apple Watch to make a transaction. For every transaction made using Apple Pay, the company takes a certain amount of interchange fee from the merchants. In the US, Apple earns 15 cents for every $100 of transactions. The company is looking for a similar deal in Australia as well, but the big four Australian banks are not willing to provide the same amount of interchange fee to the tech giant. Australian banks get 50 cents for every $100 of transactions as compared to the US, where the banks get double the fee. The big four banks of Australia are reluctant to share that amount with Apple as it will lower their revenue. According to these major Australian banks, the payments market in Australia is quite developed as compared to the US and the UK, and the technology on which Apple Pay works has already been in the market for quite some time. Hence, according to them, the value asked by the tech giant is unreasonable.

Another major issue for Australian banks is that the Reserve Bank of Australia (RBA) is planning to lower the interchange fee from 50 cents to 30 cents which will again hammer down the revenue for the banks. Considering this, they would certainly not want to split the share with the tech giant who will be processing on their already developed payment platforms.

Apple is now targeting deals with smaller Australian banks for its first step in the Australian market. The company is also planning to expand to regions like China and Canada. It will be interesting to see the future strategies of the tech giant and how it plans to expand in a market where it hasn’t been the welcomed by the banking sector.

Apple joins NFC Forum:

Apple has joined the official NFC Forum as a sponsor member. Representing Apple on the NFC Forum's board of directors is Aon Mujtaba, the company's Director of Wireless Systems Engineering.

"The top tier of NFC Forum membership—sponsor membership—entitles an organization to a seat on the NFC Forum board of directors, the association's governing body," NFC Forum Director Paula Hunter said in a statement to NFC World. "We are delighted to welcome Apple to our board of directors as an NFC Forum sponsor member."

Doug Yeager, CEO and Co-founder of SimplyTapp, provided his perspective on Apple's role in the NFC Forum to Let’s Talk Payments.

Implications:

"Apple’s entry into the NFC Forum further validates the importance of NFC technology on a global scale and its potential to push contactless, device-to-device communication into the mainstream," Yeager said. "By joining this forum as a sponsor, Apple is making a public commitment to influence the standards and development of near field communication and all of its applications beyond just payments."

Opportunities:

"Apple’s existing mobile devices are limited to payment emulation only, and their decision to join the NFC Forum could be an opportunity for the company to take fuller advantage of the technology to enable NFC reader/writer modes on newer devices in the future," Yeager added. "Apple has tremendous, unparalleled reach in terms of product offering and marketing as well as consumer and brand loyalty. By bringing Apple on board, the NFC Forum has an opportunity to generate new levels of much-needed visibility for both merchants and consumers to fully embrace NFC."

Obstacles:

"NFC technology and its biggest players are governed by strict standards that could prove challenging for Apple’s vertical-only model though it has proven successful in their other endeavors. While the company has fostered more cooperation with developers and partners in recent years, they will need to move even further in this direction as the majority of the NFC community relies on open models of exchange. Android developers, for example, have leveraged NFC alongside host card emulation (HCE) to bring contactless payments to more users. Whatever their vision, Apple’s endorsement is a major step toward progress for the NFC community.”

Priti Thakur

Priti has keen interest in digital money and fintech startups . She completed her B-School education this year and likes to write about innovation with respect to digital payments.

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