CBA wants urgent Apple regulation, direct access to iPhone payments as fees soar

The Commonwealth Bank (CBA) has called for urgent RBA regulation of Apple Pay and other big tech platforms entering the financial services sector.

In a submission to the Senate Economics Committee this week, CBA highlighted the surging popularity of digital wallet payments on smartphones in Australia.

The bank urged the federal government to take a proactive approach to regulation, rather than a “fast follower” approach we saw with the news media bargaining code.

“Whether the speed with which some digital platforms are expanding into the provision of financial services will provide a net benefit to Australian consumers and the economy in the medium to long term will in part depend on how and when the government responds,” CBA said.

“As with media bargaining, Australia can and, given adoption rates, should lead in regulating platforms that choose to provide financial services to ensure that consumers are properly protected, and financial stability is maintained.”

According to the AFR, CBA’s submission raised concerns over conduct by international big tech companies in the Australian payments space, including “anticompetitive self-preferencing, anticompetitive tying, and unreasonably preventing consumer switching”.

But this is not a new concern. CBA has been calling for the regulation of Apple Pay for over two years. The Labor government also said in December that it would make changes to the Payment Systems (Regulation) Act so the RBA could regulate digital wallets and other new payment systems, including cryptocurrency.

For CBA, a key concern is around restrictions Apple places on “tap and go” payments directly through the NFC chips on iPhones. This forces payments to go through Apple Wallet, rather than a bank’s app directly. CBA also raised the issue of growing fees attached to financial institutions digitising cards for Apple Pay.

CBA stated that third parties should have “reasonable and equivalent” access to the iPhone NFC chips to allow for direct payment from financial institution apps.

This is a recommendation that has also been made by the ACCC in its Digital Platforms Service Inquiry.

Apple has defended its position on NFC access in the past, stating it “does not provide uncontrolled access by third parties to the NFC antenna, as this would undermine the seamless customer experience for switching cards and create avenues for third parties to hack into iPhone and Apple Watch, to access the sensitive data stored within these devices.”

This is a familiar story for Apple. Developers and regulators have been pursuing the tech giant for years over the 30% commission rate it charges for paid apps and in-app purchases.

And similar to the NFC Apple Wallet system on iPhone, developers are not allowed to offer alternative payment methods. Doing so is considered an App Store violation and can result in the app being removed.

Epic Games, the creators of Fortnite got into hot water several years back after challenging Apple on this, which resulted in court cases across the US and Australia. And just last month Australian app developers joined a class action lawsuit against Apple and Google over this practice.

The ACCC has also been investigating Apple and Google’s app stores in relation to the Digital Platform Services Inquiry.