Big Four Banks Give Apple Two Finger Apple Pay Salute
The problem for both Apple and Samsung is that the big four banks are reluctant to hand over a slice of their interchange fees which is worth $2B to the big banks because they are under pressure from the RBA to tip hundreds of millions of dollars into building the New Payments Platforms and new infrastructure that will have real-time capability who they don’t want Apple to get a benefit from.
The banks are also concerned about the prospect of Apple getting in between them and their customer at a point of sale.
In the United States, Apple gets 15? on every $100 of transactions, the big technology Company who pays very little in taxes in Australia wants the same here.
Fairfax Media said recently that Australia’s big banks will not agree to this level given that interchange fees in Australia are about half the US level – equivalent to an average of 50? $100 of transaction compared with about $1 for $100 of transaction fees in the US.
Commonwealth Bank of Australia chief executive Ian Narev would not comment on the progress of negotiations with Apple, but said Apple’s attempts to offer Apple Pay in Australia won’t be as easy as it was in the US given Australian banks’ record of innovation.
“By most global standards, the capability that the Australian banking sector has generally, and Commonwealth Bank has specifically, to provide for customers is ahead of a lot of the other markets around the world where Apple has done well,” Mr Narev said last week after delivering the bank’s full-year cash profit of $9.14 billion.
“There is functionality associated with Apple Pay that we have had in the market for 18 months to two years.”
Apple Pay launched in October 2014 in the US and in Britain last month. It allows users of an iPhone 6 or Apple Watch to use a tap-and-go terminal to pay for items by holding their fingerprint on the phone or double-tapping the face of the smartwatch.
But to be switched on in a market, Apple needs to strike a deal with banks to use the payments system.
Mr Narev said CBA had already offered the same functionality as Apple Pay through its app – for users of Android phones – for two years, so it was difficult for Apple to argue it is providing much value. In the US, Apple Pay was innovative because tap-and-go was not a feature of that market.
Fairfax said that the National Australia Bank was rumoured to be closest to securing a commercial arrangement with Apple over its payments product but Fairfax Media has been told it is more likely a small bank will be the first to strike a deal with Apple and use it as a tactic to target iPhone users for transaction-account market share.
Despite the reluctance to cut a deal with Apple, Mr Narev said CBA was closely watching the movement of big tech players into financial services, as the global banking landscape is reshaped by ubiquitous mobile phones.
“If it not Apple, it might be Google; if it is not Google, it might be Samsung; if it is not Samsung, it might be Amazon; if is it not Amazon, it is going to be someone else,” he said.
“Are we going to be able to sit here today and pick the major winners? No. But the disruption is structural. It is only going one way. And I don’t think there will ever be a point where me or my successor, or his or her successor, is ever going to sit here and say their war is done and we won. This level of innovation is here to stay.
“But we have got customers, we have got distribution, we have got brand, we have got product. So as long as we are adding to that investment and have the right execution focus, we should be able to be really competitive.”