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James Martin/CNET
Apple Pay has its sights set on Australia, but the nation’s banks are purportedly proving to be stubborn.
Apple Pay launched in the US in October as Apple’s first foray into contactless mobile payments. Using an iPhone 6, iPhone 6 Plus or Apple Watch, people can pay for items on the go at supported retailers via NFC (near-field communication) technology. Apple has been drumming up support for Apple Pay among more and more banks and retailers in the US. But to become more of a fixture, Apple Pay needs to expand globally, especially as rival services such as Samsung Pay and Google’s Android Pay start to ramp up.
Expanding Apple Pay globally is more of a challenge than it may sound. For each credit or debit card transaction, a retailer pays a transaction fee to the bank that issued the card. In the US, Apple gets a cut of that action, reportedly around 15 cents on every $100 of transactions.
But banks in Australia are balking at those terms, hesitating to give Apple a slice of the $2 billion they earn in transaction fees each year, according to a story published Monday by Fairfax Media. One reason is that Australian banks charge a lower transaction fee than banks in the United States, around 50 cents for every $100 of transactions versus around $1 for $100 of transactions in the US, the report said. Yet Apple is reportedly asking for the same piece of the pie that it receives in the US.
Another stumbling block for Apple is that at least one Australian banking executive has said that the country’s banks already have technology seemingly comparable to Apple Pay.
“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,” Commonwealth Bank of Australia CEO Ian Narev said last week. “There is functionality associated with Apple Pay that we have had in the market for 18 months to two years.”
Specifically, Narev said that his bank already has an Android app that provides the same functionality offered by Apple Pay. Fellow Australian bank Westpac also supports tap-and-go purchases with retailers using an Android phone app.
Australian banks are also hesitant to support Apple Pay because they’re being forced by the Reserve Bank of Australia to devote hundreds of millions of dollars toward creating something called the New Payments Platform, which would give Australian businesses and consumers a fast, real-time system for making payments. The concern is that Apple would hop on board this new system without having to pay anything toward its development, Fairfax Media said.
Further, banks there are concerned that Apple would muscle in between them and their customers at the point of sale, which could undermine the banks’ attempts to directly sell other products.
Apple Pay has already faced similar issues elsewhere, especially over Apple’s high cut of the transaction fees. Apple has been talking with banks and financial firms in China and Canada about supporting Apple Pay. But Chinese banks don’t want to give up a big percentage of the transaction fees to Apple, an employee of one large bank told MarketWatch in April. And Canadian banks are worried about the involved in agreeing to use Apple Pay, sources told The Wall Street Journal around the same time.
Apple Pay recently did expand beyond the US into the UK, though some of the announced banks failed to support the system at its initial launch. Apple Pay’s UK page shows nine banks so far on board with another five, including Lloyds Bank and Bank of Scotland, coming soon.
Reports say that Apple had to lower its cut of transaction fees to win support in the UK. To gain any traction in Australia, the company may have to do the same thing again.
Apple did not immediately respond to CNET’s request for comment.
