Apple Pay, the iPhone maker’s digital wallet, looks like it’s going to become a battleground for regulators, with several antitrust probes having already begun as the COVID-19 pandemic turbocharges use of contactless payments.
The Cupertino company has spent much of 2020 fighting allegations of anti-competitive behaviour in its App Store. By contrast, its financial services business has attracted little attention in the US, meriting only a passing mention in a 450-page report by Congress’ antitrust subcommittee in October. But Apple Pay is growing fast as consumers try not to touch buttons or handle cash because of the coronavirus.
Apple Pay is facing two antitrust probes in Europe. First, the European Commission opened a formal antitrust probe into Apple Pay back in June. The move was mirrored by a Dutch regulatory body that launched its own investigation into Apple Pay this month.
Apple takes an estimated 0.15 per cent fee on each transaction. Analysts at Bernstein estimated, before the pandemic, that it would facilitate one in ten of the world’s credit card transactions worldwide by 2025. In a survey, Visa found that nearly half of consumers
‘would not shop’ at stores that fail to offer touchless checkout.
Jason Gardner, the CEO of payments platform Marqeta, was quoted as saying:
They are really building out, within the Apple Pay team, a financial services juggernaut. Apple Wallet is a killer app — more of a killer app than much of the world really understands right now. And it’s absolutely going to become a battleground for regulators in the future.
Complicating matters further, a German parliamentary committee unexpectedly voted to force Apple to open up the iPhone’s NFC hardware and the Apple Pay feature to rival payment providers in the country. Although Apple as of iOS 11 does permit limited use of NFC in certain third-party apps, it still prohibits third-party mobile wallet apps from using it.
“Apple only giving the consumer one option in how to use that technology to pay for services is what will get the attention of regulators,” according to Jonathan Osborne, a former federal prosecutor in Florida and attorney with Gunster. The iPhone maker claims the restriction has to do with security. Jennifer Bailey, head of Apple Pay, told the European Commission in December that Apple wants to keep all user data private.
‘We don’t store or have access to your original bank card or credit card number — and neither does the merchant,’ she said. ‘So when you buy something using Apple Pay, Apple doesn’t know what you bought, or where you bought it.’
Rivals, she suggested, might use ‘a technical architecture that’s ultimately less private and less secure.’ Critics point out, however, that Apple does allow carmakers, hotel companies and gym equipment makers access to its devices’ NFC chips for non-payment functions.
Apple’s guidelines for developers encourage making Apple Pay the default option. “Consider presenting the Apple Pay button as the first or only payment option, displaying it larger than other options, or using a line to visually separate it from other choices,” Apple advised.
Anti-competitive behavior has been a hot topic in the European Union for a while now, and they seem to be increasingly focusing on Apple Pay. As a result, this decision from Germany could expand to other regions within the EU in the near future.
Apple Pay is currently being used by Loup Ventures-estimated 507 million people. Looking at it another way, roughly every other iPhone owner in the world uses the feature. By comparison, about 67 million people used Apple Pay four years ago. The feature was initially launched in the United States six years ago back in October 2014.