June 7, 2021

Apple denies Australia’s payment rules make it choke competition

By Eric Johansson

Apple has denied choking Australia’s payments market and encourages the government to keep the financial services rules just the way they are.

The Cupertino-headquartered tech titan has recommended that no changes should be made to the existing financial services regulatory regime in a written submission to the Parliamentary Joint Committee on Corporations and Financial Services.

“Apple believes that Australia’s existing regulatory framework is encouraging and fostering innovative developments that offer competition to incumbent banks, while minimising the risks that arise from developments in technology and broader structural changes to the economy driving new forms of payments,” the iMac maker said.

Several market stakeholders, including several of the big five banks in Australia, had previously expressed concern over the growing dominance of Big Tech firms.

They’d warned that Apple and Google’s dominating position in the mobile market had essentially made Silicon Valley’s giant twosome the gatekeepers of the sector.

“These platforms have very large user bases and benefit from strong network effects, which is likely to result in them being in a strong negotiation position with payments system participants and can make it difficult for smaller firms to compete,” the Reserve Bank of Australia told the committee in April.

True to form, Cupertino rejected the notion that it throttled competition in any way and warned that any reform to Australia’s payment system regulations shouldn’t undermine competition and impose new technological restrictions.

“Apple believes policies or regulations that seek to prescribe or dictate a technical approach are unnecessary and create severe unintended consequences, including compromising the security of the payments systems and stifling innovation that benefits customers, banks, and the broader payments industry,” Apple said.

It maintained that instead of being a competitor with an unfair advantage over other financial services firms and fintechs, it has provided the technological infrastructure for these businesses to thrive in a safe and secure way.

Apple said it didn’t restrict its partners from developing their own iOS, pointing at how major Australian banks and fintech companies like Alipay, PayPal and WeChat Pay all have apps on the App Store.

“Apple does not issue credit, debit or prepaid cards, and does not process, authorise or execute transactions,” the iMac maker said. “Apple is not a bank, financial institution or payment service provider. Rather, Apple has partnered with banks and other financial institutions to enable them to securely store payment credentials on Apple devices which their customers use to make payments.

“Apple does not provide financial services or payment services – 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 credit, debit or prepaid cards.”

Cupertino neglected to mention that it takes a 30% cut of any profits made from apps in the App Store, the matter of which is currently the focus of the expected verdict in the trial between Apple and Epic Games.

The iPhone maker also launched the Apple Card a few years ago. It is powered by Green Dot Bank, a fully licenced bank, and only available in the US.

The Australian payments market is not the first time that Apple has been accused of choking its competition by leveraging its dominating market position.

Big Tech firms – such as Google, Facebook, Amazon and Apple – are facing growing pressure from regulators to prove that they are not stifling competition.

Over the past few years, market watchdogs have seemingly ramped up their efforts alongside a smattering of legal battles between big businesses and their smaller rivals.

As they keep pushing into the fintech space, market stakeholders believe more antitrust cases will be rolled out.

The committee looking into Apple and the Australian payments industry is the latest step towards transforming Oz’s financial services sector.

It follows from the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry launched in 2017.

In February 2019 it delivered its final damning report, unearthing a rampant toxic culture full of misconduct, poor risk management, sales-driven commissions, giving inappropriate advice and so on which essentially boiled down to one thing: the market had to change.

Consequently, the Australian government has taken steps to transform the sector with new laws and regulations to nurture the nation’s challenger banks, regulation technology firms and its overall financial services market.

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