Chapter 5

Competition issues

Many submissions to this inquiry raised issues related to competition and
anti-competitive behaviour by actors within the mobile payments sector. This chapter provides a background on the power dynamics within this sector and outlines the key competition-related issues identified throughout this inquiry, including:
market dominance;
app store controls, including terms of access, in-app bundling, gatekeeping, and self-preferencing; and
third-party access to the near-field communication (NFC) antenna.
This chapter then provides a committee view on competition issues and recommendations.

Background on competition within the payments industry

Reserve Bank of Australia (Reserve Bank or RBA) governor, Dr Philip Lowe, noted in an address to the AusPayNet summit in late 2020 that digital wallets raised new competition issues, particularly related to access to the NFC chip on Apple devices, data privacy related to transactions made via Google Pay, and fees charged by Apple to merchants for using its payments platform.1
The Australian Competition and Consumer Commission (ACCC) in March 2021 released its second interim report on its inquiry into digital platform services, which focused on app marketplaces. The interim report pointed to several possible issues related to competition:
… the market power of each of Apple and Google; the terms of access to app marketplaces for app developers, including payment arrangements; the effectiveness of self regulation, including arrangements to deal with harmful apps and consumer complaints; and concerns with alleged self-preferencing and the use of data. These issues affect competition with potentially significant impacts for both app developers and consumers.2
The device-centric nature of many wallets underpins many of the
competition-related issues in this industry. Apple’s mobile devices support only Apple’s own Apple Pay natively at the level of the operating system. Samsung Pay, Garmin Pay, and Fitbit Pay are similarly supported only by hardware produced by each of these manufacturers, respectively. Many customers are consequently tied to specific digital wallets and are prohibited from making use of other wallets because of their choice of mobile device.
In a submission to this inquiry, FinTech Australia noted:
Competition in the sector is currently at risk due to the limited number of competing mobile device manufacturers and operating system developers. The limited range of hardware and software solutions play a critical role as the overarching infrastructure for mobile payments. In turn, there is a risk that a lack of competition in these sectors will reduce consumer choice and business innovation, as well as increase costs for domestic innovators and start-ups.3
As a result, FinTech Australia cautioned that the ‘existing power imbalance between the present technology giants and new start-ups is likely to impact competition and stifle innovation’.4
Digital wallets can also be unique to specific financial institutions, like
bank-specific apps, or may be tied to specific payment networks, like Visa’s Visa Checkout or Mastercard’s Masterpass—both now defunct.5
Barriers to entry can also discourage new entrants into the mobile payments space. The two-sided market dynamics (see Box 5.1, below) associated with the payments industry can discourage merchants from supporting or investing in payment platforms that do not already have a sufficient client base, just as most customers are unlikely to adopt a payments solution that is not already widely supported by merchants. New payment platforms therefore generally require an existing client base or a unique feature set to attract customers.
The RBA noted that these dynamics within the mobile payments industry have led to a ‘tendency for a small number of players to dominate industries such as payments, where there are strong network effects and economies of scale and scope’.6
EY (formerly Ernst & Young) also noted that competition within the payments space could increase the level of fragmentation between services, which could in turn compromise the consumer experience in terms of the interoperability of different platforms, and may undermine inclusion and accessibility.7

Box 5.1:   Two-sided markets

Digital wallets and mobile payments are often described as ‘two-sided markets’ or ‘two-sided networks’. A two-sided market is one in which service providers sell their product to enable an interaction between two distinct user groups. In the case of digital wallets, providers offer a service to both customers and merchants by enabling transactions between these two groups.
Two-sided markets are a common feature of financial services, including traditional payment systems like credit cards.
Two-sided markets benefit from the network effect, in which the product becomes more appealing as uptake increases. In contrast, a negative network effect can result from market fragmentation. Two-sided markets offer the potential for providers to tap into two revenue streams but the success of a product is dependent on adoption by both groups.
Buy-now-pay-later providers also generally operate a two-sided market, in which they partner with retailers as well as provide a service to consumers that enable each group to transact with the other.

Market dominance

The committee was repeatedly told that the mobile payments industry in Australia is dominated by Apple and Google, which combined account for nearly 100 per cent of point-of-sale (POS) transactions from mobile devices. One survey estimated Apple’s share of the mobile operating system market in Australia in June 2021 at nearly 56 per cent, with Google claiming a 43 per cent market share.8
In contrast, Apple’s market share in Asia is reported to be 16 per cent, with Google claiming nearly 83 per cent of the mobile operating system market. In India, Apple reportedly has around 3 per cent of the market relative to Google’s 96 per cent.9
The Australian Financial Industry Association (AFIA) described the situation in Australia as an ‘asymmetry of influence’ in which mobile device (or ‘handset’) manufacturers are able to impose their own terms and conditions on developers and service providers using their platforms.10
The Commonwealth Bank of Australia (CBA or Commonwealth Bank) noted in its submission, ‘Apple and Google are effectively the only two mobile operating systems in Australia’.11
The Commonwealth Bank also noted:
Mobile device manufacturers act as a gatekeeper over a key channel of distribution of a range of products and services, including essential financial services such as payments. As customers tend to stay with the same mobile OS [operating system], and typically have a single mobile device, digital platforms have sole control and therefore a substantial degree of power over the markets within their ecosystem, enabling them to dictate the fees, contract terms and conditions of the Australian businesses that rely on them.12
CBA CEO, Mr Matt Comyn, told the committee, ‘about 80 per cent of [mobile transactions] are through Apple’. He consequently described Apple Pay as having ‘probably become largely essential for financial institutions.’13
CBA provided further evidence to the committee based on an analysis of contactless payments made through its primary scheme partner, Mastercard:
Of the CBA digital wallet payments made by tapping a phone or related device, 80 per cent are made using Apple devices (e.g. Apple iPhone, Apple Watch). CBA considers it likely that this proportion would be indicative of Apple’s share of payments made by digital wallets in Australia.14
Apple, however, disputed this figure, claiming its share of credit and debit card expenditure in Australia is under 10 per cent. Apple told the committee:
The misleading 80% figure shared initially by Commonwealth Bank and cited in future dialogue and media reports does not represent Apple Pay’s share of any market. It is simply the percentage of Apple Pay transactions from Commonwealth Bank’s overall digital wallet payments at point of sale.15
Beem It CEO, Mr Mark Britt, also raised concerns that mobile payments in Australia are dominated by Apple and Google, both of which are also mobile handset manufacturers. He warned of what he termed the threat of ‘platform tyranny’ by handset manufacturers without adequate regulatory intervention.16
FinTech Australia CEO, Ms Rebecca Schott-Guppy, also told the committee, ‘Apple acts as a strict gatekeeper to the digital wallet on iPhones’. She also cautioned that Apple’s control over the NFC chip (see below), if left unchecked, ‘will ultimately lead to a monopoly within the payments space’.17
Dr Lien Duong, Dr Duc-Son Pham, Professor Grantly Taylor, and Dr Baban Eulaiwi told the committee that ‘many regulators around the world have been increasingly concerned about Apple’s commercial dominance on its Apple Pay mobile wallet’.18
The ACCC’s submission pointed to similar risks associated with the dominance of the payments industry by Apple and Google. It warned of inadequate arrangements across the sector for dealing with harmful apps or consumer complaints, and identified examples of anti-competitive behaviour among platform owners, including promoting their own apps over those of their competitors or collecting data to help maintain the market dominance of their own apps.19
The ACCC had previously cautioned that the dominance of Apple’s App Store and Google’s Play Store in distributing mobile apps in Australia is impacting both competition and consumers, arguing that measures were needed to address this.20
Dr Duong and colleagues similarly claimed ‘there is an imbalance in bargaining power between Australian payment service providers and Apple’.21
The RBA observed:
[Mobile payment platforms] have very large user bases and benefit from strong network effects, which is likely to result in them being in a strong negotiating position with payment system participants and can make it difficult for smaller firms to compete.22
Epic Games claimed in its submission:
Apple and Google face limited competitive constrains in mobile app distribution and resultingly [sic] have market power in their dealings with app developers, which is likely to be significant. App developers wishing to access iOS and Android [Google’s mobile operating system] have few, if any, viable alternatives for app distribution… It is also highly likely that this market power enables them to unilaterally set and enforce the rules that app developers must satisfy, including requirements that prevent app developers from distributing their apps on competing or alternative distribution platforms and from offering alternative payment systems for in-app purchases of digital content.23
Jana Scmitz from CPA Australia told the committee:
Apple’s significant market share has basically made Apple Pay a
must-have service for Australian businesses if they want to offer their customers digital payment services. What that also means is that Apple, as the platform owner, dictates contractual terms, fees and conditions, which Australian businesses more or less have to comply with or are forced to accept those terms and conditions.24
FinTech Australia CEO, Ms Rebecca Schot-Guppy, told the committee, ‘competition in the [payments] sector is currently at risk due to the limited number of competing payment platforms’.25 She also highlighted risks associated with the market power of a small number of firms:
One of the most pressing competition issues we have already witnessed is that mega platforms such as those run by Google, Apple, Amazon and Shopify, among others, have immense market power. This doesn’t just impact competing platforms but they can also dictate the products and services that appear on their platforms. These companies, because they are mega platforms, are also gatekeepers, which gives them enormous power to enter new markets and hinder the business of their competitors.26
Several witnesses drew the committee’s attention to the News Media Bargaining Code (see Box 5.2, below), pointing to the code as an example of how to deal with monopoly market power. For example, Dr Lien Duong told the committee, ‘we could probably do something similar in the area of mobile payments and digital wallets to ensure competition and innovation in this area’.27

Box 5.2:   News Media Bargaining Code

The Australian Communications and Media Authority (ACMA) described the Code as ‘a mandatory code to help support the sustainability of public interest journalism in Australia’. The Code aims to address ‘bargaining power imbalances between digital platforms and Australian news businesses’ by enabling news businesses to ‘bargain individually or collectively with digital platforms over payment for the inclusion of news on the platforms and services’.
Digital platforms must participate in the Code if the Treasurer determines that it should apply to them.28
CBA also drew comparisons with the situation the news bargaining code was designed to address:
In both cases, a small number of very large companies are providing platforms, or gateways, to services provided by other companies — be they media services or payment services.
The platforms in question benefit from strong network effects, meaning they have come to dominate the markets in which they operate. This means that when the platform providers negotiate with companies on access to their platforms, they face very little risk that their offer will be rejected, almost regardless of the terms proposed.
The imbalance in negotiating power means that the platform providers can demand a share of revenue that is not reflective of their contribution to providing the underlying financial service.29
CBA described the News Media Bargaining Code as requiring negotiation in good faith, with arbitration where negotiations fail.30

App marketplace controls and self-preferencing

This section outlines four sets of interrelated issues raised in submissions to this inquiry related to the terms under which Apple and Google grant access to their mobile operating systems for app developers and service providers, and the ability of each platform owner to promote their own services over those of third parties. These include:
the terms of access under which developers can offer their apps and services on each platform;
requirements for developers to process in-app transactions through the payments platform run by the respective device manufacturer (in-app payment system bundling or IAP bundling);
device manufacturers allegedly serving as so-called ‘gatekeepers’ that limit or intermediate the access of developers to customers; and
self-preferencing, through which device manufacturers are alleged to use control of their respective app marketplace to increase the likelihood of customers adopting their own apps rather than those developed by third parties.
Submissions to this inquiry alleged that app developers and financial service providers are required to enter into agreements with Apple on a
‘take-it-or-leave-it’ basis if they wish to have their apps included on the Apple App Store or Wallet app.31
The Australian Finance Industry Association (AFIA) highlighted in its submission:
[Payment] providers are required to enter into agreements with Apple to provide their customers with the ability to make contactless payments. Apple imposes non-negotiable conditions on providers, has different agreements for providers based on size (some with more onerous requirements than others), and it charges providers fees on a per transaction basis for the use of its Apple Pay service.32
The submission from Epic Games detailed Apple’s contractual requirements of developers:
In order to develop and offer iOS‐compatible apps in the App Store, mobile app developers must enter into a number of standard, non‐negotiable agreements set by Apple, including the Apple Developer Program Licence Agreement ("PLA"). The PLA, in turn, requires compliance with the App Store Review Guidelines ("App Store Guidelines"). In addition, the PLA requires app mobile developers like Epic to enter into a separate agreement with Apple in a standard form (known as "Schedule 2" to the PLA) if they want iOS device users to purchase in‐app content.
By the terms of the PLA, App Store Guidelines and Schedule 2, Apple imposes a number of restraints on app developers such as Epic, including but not limited to requiring app developers to:
agree to distribute their apps to iOS device users only through the App Store, and not distribute them to iOS device users through any other channel;
agree to appoint Apple Inc and its subsidiaries, including Apple Pty Limited, to distribute their apps via the App Store;
agree to only use Apple’s IAP for the processing of payments for
in‐app content purchased by iOS device users; and
agree that Apple Inc and its subsidiaries, including Apple Pty Limited, will deduct a 30% commission from the price paid by users for in‐app content (other than in relation to certain long‐term subscription users and smaller developers under Apple's Small Business Program).33
Epic raised similar concerns related to Google’s alleged ‘non-negotiable’ terms and conditions (the Google Play Developer Distribution Agreement, DDA) that reportedly requires that developers not seek to distribute apps other than through the Play Store, that in-app payments are processed exclusively through Google Play Billing, and that developers agree to a 30 per cent commission on all app and in-app sales (other than for some subscriptions).34
Epic described these terms as resulting in ‘significant detriment to Australian consumers’.35
Google told the committee:
Google does not “push” onerous terms on developers. All apps are subject to the same set of rules and policies (i.e., the Developer Distribution Agreement, or “DDA” and the Developer Program Policies or “DPP”) so that the users and developers can have consistent experiences in using our Play store.36
The Australian Financial Review (AFR) noted that in Apple’s case, in addition to the 30 per cent commission, the Apple Store has contractual clauses ‘preventing third-party app developers from informing their users that they can buy the same software and services outside the store, often at a lower cost.’37
The ACCC described these terms of access as part of broader competition issues related to Apple and Google’s vertical integration:
The competition concerns arising from restricting the access of rival third-party app developers to certain device features are part of a broader issue regarding the vertical integration of Apple (and separately, the vertical integration of Google/Android) which arises from their control of the relevant operating system, app marketplace and their own first-party apps. The consequences of vertical integration and the risk of self preferencing is a key issue for the ACCC in digital platform markets.38
Another area of concern raised in submissions to this inquiry was the requirement that developers use the payment platforms offered by each device manufacturer. Apple’s App Store and Google’s Play Store both mandate the exclusive use of their in-app payment (IAP) systems for the provision of goods and services purchased through apps distributed on their platforms. This practice effectively excludes alternative competing payment platforms.
Developers, who are mandated to use the IAP processing facilities run by app store operators, report paying up to a 30 per cent commission for each transaction or in-app purchase, excluding physical services and
subscription-based purchases. The issue of fees for processing IAPs is discussed further in Chapter 6.
Dating service developer, Match Group, expressed concern around what it termed the ‘bundling of access to mobile app stores with the mandatory and exclusive use of the app store operator’s prescribed in-app payment system’. Mobile app developers consequently have no choice regarding in-app payment processing platforms, resulting in a lack of innovation and pricing with respect to these platforms, claimed Match Group.39
Epic Games described IAP bundling as leading to ‘anticompetitive harm’ that leads to the foreclosure of alternative payment systems, higher prices paid by consumers, and stifles innovation.40
Restaurant & Catering Australia expressed similar concerns, claiming that Apple’s terms and conditions ‘effectively leave developers, small businesses and consumers no choice but to use Apple’s own payment application and system for contactless transactions using Apple’s mobile phones and technology’.41
EY also noted:
In the innovation space, technology providers who wish to exist within the big tech ecosystem to access customers, are required to use native in-app payment methods. This removes competition, whilst taking a significant margin on payments and subscriptions. It also creates a significant disadvantage to mobile payments and digital wallet providers, as they are potentially limited in their ability to innovate, at the cost of either revenue or the customer experience.42
Allegations of anticompetitive IAP bundling triggered court action between Epic and Apple on 16 November 2020. The ACCC is seeking leave to appear in support of Epic as amicus curiae (‘friend of the court’), as set out below:
The ACCC has sought leave to appear at the hearing of Epic Games Inc’s appeal to the Full Federal Court against an earlier Court decision to stay Epic’s proceedings against Apple Inc.
Epic instituted proceedings in the Federal Court of Australia against Apple in November 2020, making allegations that Apple had engaged in anti-competitive conduct in breach of the Competition and Consumer Act (CCA) in relation to the App Store.
Epic alleges that Apple has breached the CCA by not allowing alternative app stores on its iOS operating system for Apple mobile devices, and by charging app developers a 30 per cent commission on in-app purchases of digital content.43
Epic also initiated legal proceedings against Google on 8 March 2021 under the Competition and Consumer Act 2010 in relation to alleged restrictions placed on mobile app distribution and in-app payments.44
Mr Leuner told the committee, ‘Apple, Facebook and Google are able to take their market power and potentially self-preference or foreclose rivals, using that data to cement their position, buying out potential threats and things like that’.45
CBA CEO, Mr Comyn, told the committee:
Manufacturers of mobile handsets and associated software set the terms in which third parties can offer these app based services, particularly with respect to payments for and via services. They can also restrict apps that provide services that compete directly with those supplied by the manufacturer of the mobile device.
Given the rapidly expanding market power of the largest app store providers, companies wishing to reach consumers must, by and large, comply with the terms set by the platform providers themselves. If they do not, they are electing to be absent from the ecosystem, forgoing a primary channel preferred by their customers.46
Ms Schot-Guppy told the committee that these payment platforms are ‘increasingly acting as a player and a referee, using their dominant position to build and then preference their own digital financial products’.47 She claimed, ‘the duopoly of the smartphone operating systems means that control over app stores can be used to stifle and prevent competition’ thereby reducing consumer choice, innovation, and potentially driving up costs.48
Ms Schot-Guppy argued, ‘if tech companies cannot prove to be impartial in how they treat competing products on their platforms, then they shouldn’t be able to put competing products on the platforms they control’.49
With respect to the accusation of self-preferencing, Ms Longcroft noted:
Google, at least in the Google Play store, treats our own apps on equal par with all other app developers in terms of the policies and services that they are subject to. We do not use that personal data for any purposes other than in accordance with our privacy policy. To my knowledge, we do not self-preference in that regard.50
Google also provided the following:
Google and non-Google apps through our Play store generally have access to the same level of data or features, with some limited exceptions. Google apps may have access to data or features not shared with app developers due to technical limitations, security concerns or because the data is proprietary to Google.
Any data we collect and share with developers about their apps protects the privacy and security of users. In line with our clear commitments, we do not share the personal information of users with companies, organisations or individuals outside of Google except in limited circumstances.51
The AFR outlined Apple’s approach to the App Store in an interview with the company’s CEO, Mr Tim Cook:
Cook likens the App Store to “an economic miracle” through which more than $600 billion of commerce was pumped last year. As such, Apple’s controls are a small hindrance to developers’ access to an extraordinary opportunity.
As an individual, you can sit in your basement, no matter where your basement is, and you can write an app. And with the touch of a button, you can distribute your app in 175 countries in the world and become a global seller, a global company. You’re not negotiating with a lot of different retailers around the world. You’re not having to worry about converting currencies. You’re not worrying about local regulations. All of the heavy lifting of going into a country is done.52

The AFR went on to note:
But there’s also a very beautiful garden of smartly designed products that just work, intuitively and seamlessly, together. Once you’re in, it’s very hard to leave.53
In its report on digital marketplaces, the ACCC acknowledged that ‘the practices and politics of both Apple and Google restrict competition to distribute mobile apps within their respective mobile ecosystems’. The competition regulator nevertheless noted that these practices enable each platform to increase competition between one another. Regulatory intervention that decreases competition within Apple’s or Google’s ecosystem could therefore reduce competition between the two platforms, the ACCC cautioned.54
The ACCC report suggested ways in which Apple and Google could improve the competitiveness of their respective app stores, such as allowing third parties to charge for their apps outside the app store and advertise that fact to customers. ACCC Chairman, Mr Rod Sims, advised that the competition regulator has not yet decided to mandate changes to app marketplaces in Australia, but continues to watch to ensure Apple and Google address the potential for consumer harm in their app store models.55

Third party access to the NFC chip

Much of the evidence before this committee criticised the extent to which developers had access to NFC chips on Apple devices. For example, the submission from the Australian Retailers Association (ARA), raised concerns with Apple restricting direct third party access to NFC chips on its devices, claiming, ‘this prevents or at least severely restricts the potential for new payments innovations which can be used by retailers and consumers’.56
The ARA also cautioned,
[These restrictions] effectively leave developers (including retailers) and consumers no choice but to use Apple’s own payment application and system for contactless transactions using Apple mobile phones and technology.57
The ARA submitted that Apple’s design approach to the NFC antenna has undermined innovations in the payments sector, limiting the ability of developers to offer loyalty programs and coupons.58
Apple refuted ARA’s claims stating, ‘the user experience cited by the ARA has been available in Australia since October 2017 with Woolworths Rewards, which enables consumers to use their loyalty card with NFC on Apple devices’.59
CBA CEO, Mr Matt Comyn, claimed Apple’s control over the NFC chip meant, ‘there can be no competing wallets on the iOS operating system’.60
Industry analyst Mr Lance Blockley told the committee that the ‘quarantine and fee for NFC access would hold back competition because it holds back the development of new, innovative wallets’.61
Apple rejected these claims, arguing that its approach to third party access to the NFC antenna on its devices ensures the security of its customers, fosters competition by enabling customers to easily switch between cards, and enables non-payment uses of NFC (such as car keys, tickets, or health insurance cards). ‘It is exactly this ease of switching cards that some banks are hoping to prevent’ argued Apple, ‘by calling for an architecture that gives a single bank app control of the NFC functionality on Apple devices to the detriment of other banks and non-bank developers’.62
Apple further stated:
Calls by some banks to regulate and require that Apple adopt the same approach as its main competitor, Android, stifles competition, reduces innovation, and deprives customers of a better, more secure experience.
Apple also submitted that the Host Card Emulation (HCE) model used on Android (Google’s mobile operating system) devices effectively grants a single app control over the NFC antenna, to the exclusion of other apps and use cases:
Allowing Commonwealth Bank to have sole control of the NFC controller would assist them in not only locking out competitors but also prevent innovation around non-bank use cases such as car keys or health insurance cards.63
The issue of third-party access to NFC chips on Apple devices was the subject of a request in 2016 by five Australian financial institutions (AFIs) seeking permission from the ACCC to engage in limited collective negotiation with Apple. While the ACCC agreed with the AFIs that ‘public benefits would potentially arise in terms of greater competition,’ it ultimately concluded that the public detriments outweighed these benefits, specifically in terms of the distortion to the competition between Apple and Google, the lessening of competition between the banks, and market distortions.64
Summarising the determination, the ACCC’s Executive Manager for Mergers, Exemptions and Digital, Mr Tom Leuner, told the committee, ‘in what was ultimately a very finely balanced decision, the ACCC felt that it was not convinced that there was a net public benefit from that collective negotiation, and therefore it didn’t authorise it’.65
Professor Taylor acknowledged competing opinions on this issue, telling the committee, ‘there are arguments as to whether opening up access to Apple’s NFC interface facilitates competition or whether it will actually impede competition’.66
In its submission to this inquiry, Apple defended its third-party NFC restrictions, claiming the architecture supports contactless transactions in the transport industry, universities, public transport, among other sectors. The tech firm also warned that efforts to open access to NFC chips in its devices would ‘negatively impact Australian consumers’, and ‘create severe unintended consequences’ in terms of security and innovation.67
Apple provided the following details:
Banks in Australia are able to initiate an NFC payment or read data via NFC directly from their iOS apps, and/or to leverage alternative technologies for making mobile payments. Globally there are a number of other mobile payments apps and wallets on the iOS platform.68
Apple describes its Apple Pay platform as ‘open to all card issuers and payment schemes/networks’, which is currently used by over 100 banks, card issuers, and FinTechs in Australia.69
Apple further claimed:
Apple does not ‘restrict’ or ‘limit’ banks from making NFC payments with their mobile banking applications. Instead, Apple has developed a highly innovative and secure architecture for NFC that is open to players in the payments ecosystem, and has helped FinTech start-ups and domestic payment schemes to compete with more established rivals.
In addition, Apple has enabled banks to initiate NFC payments directly from their iOS apps… by designing a unique and differentiated technical architecture that allows banks to directly initiate NFC payments from their apps without compromising the user experience for consumers who wish to switch between cards from different banks/card issuers.70
Apple’s submission also claimed that ‘third party apps can directly initiate contactless payments without having to pass sole control of the near field communication (NFC) architecture to a single bank app’.71
Apple also argued that it’s approach to NFC access had not stifled competition, telling the committee:
The argument that Apple’s approach stifles innovation is contradicted by the fact that there are no examples of successful bank apps on Android despite having so-called ‘direct’ NFC access on Android. Some banks have actually withdrawn their NFC wallets on Android.72
Apple further argued:
Apple does not agree with the suggestion that it should abandon its privacy focussed approach and copy a model from its competitors that is ultimately less secure and erodes privacy for Australian consumers. Not only would this go against the spirit of competition and innovation that Australia aims to foster, it would also deprive the market of an option that represents the Australian values of privacy and security.73
Google’s submission detailed its alternative open access approach to third party payment platforms and NFC:
Android provides open access to its Host Card Emulation (HCE) technology which supports the ability to create digital versions of cards across Android devices. This open access enables any third party (including developers, banks, hardware manufacturers, fintechs etc.) to develop mobile payment functionality. It is this open access that has led to a wide range of options for consumers in digital wallets on Android, thus enabling the likes of Samsung Pay and bank apps to co-exist alongside Google Pay.74
Android also allows users to select their own default digital wallet or switch for one-time use.75
Ms Layfield pointed to other benefits of Google’s open approach to payments, arguing that competition from other digital wallets enhanced the experience for customers, improved the online commerce experience for users, and drove greater online engagement from users. She summarised the advantages of greater competition:
Our whole ecosystem is directly benefited when we see more online activity, so things that encourage users to go online to use their phones and to shop in an online environment indirectly helps our businesses.76
While Android’s more open approach to NFC on its devices has generally not been subject to the same criticism as that taken by Apple, the RBA noted that ‘some digital wallet providers may seek to commercialise customers’ data,’ as Google has in some countries.77
The Australian Financial Industry Association also cautioned that while Google and Samsung do not currently impose fees on card issuers, ‘there are limited controls or competitive pressures in the market that would prevent these entities from charging [fees]’.78
Apple claimed the implementation of HCE on Android requires users to pair the functionality of an NFC chip to a single app, undermining consumer choice, reducing competition among digital wallets or banks and complicating the user experience.79
Dr Anthony Richards also noted,
As we have seen in Europe, if you were to mandate that [banks] must have access [to the NFC chip outside of Apple Pay], you then have to say something about what fees might be permissible. So it’s a tricky issue. If you impose an access regime—and the Reserve Bank has a power to impose an access regime relating to a payment system—we would then have to think about fees and conditions of access. So it’s probably not the case that entities would suddenly get access to the NFC chip and necessarily get that for free.80
In its interim report on digital platforms, the ACCC noted:
[By reserving NFC functionality] Apple is able to differentiate its own app (Apple Pay) to attract users and may limit the potential competitive constraint of existing and potential rivals due to these product differences.81
Mr Marcus Bezzi from the ACCC nevertheless told the committee, ‘we’ve not concluded an investigation in which we’ve expressed a view one way or the other in relation to the NFC issue’.82
Mr Leuner similarly told the committee:
We think access to the NFC certainly has the potential to be a serious competition issue with the real risk that potentially competitors to Apple through developing their own NFC technology are foreclosed from being able to do that.
That said, Mr Leuner conceded the ACCC has ‘never done a deep dive into the NFC issue specifically’. The closest the Commission has come to looking at the issue was during its recent inquiry into app or ‘electronic’ marketplaces. The government’s direction, however, excluded the ACCC inquiry from considering payments platforms.83
The Treasurer’s Direction to the ACCC provided the following definition of an electronic marketplace:
A service (including a website, internet portal, gateway, store or marketplace) that:
facilitates the supply of goods or services between suppliers and consumers; and
is delivered by means of electronic communication; and
is not solely a carriage service (within the meaning of the (Telecommunications Act 1997) or solely consisting of one or more of the following:
providing access to a payment system;
processing payments.84
Mr Leuner suggested that the ACCC could ‘get behind the veil of confidentiality’ of commercial arrangements related to payment platforms if it was provided with an inquiry power.85
When Treasury officials were asked whether the department had looked at the issue, Mr David Pearl, Assistant Secretary, told the committee, ‘my responsibilities go to competition policy settings and liaising with the ACCC, so we haven’t looked specifically at that issue’.86
Mr Pearl further explained:
It goes to the separation between our role as advisers to government on policy and the ACCC’s, RBA’s and other regulators’ roles. What we would do is liaise with the ACCC on terms of reference for any inquiries they may wish to undertake. They have investigative and other powers which they use. So we would be reliant on the ACCC as the regulator or on other regulators in the payments ecosystem.87
Treasury Assistant Secretary, Ms Nghi Luu, added that the ‘access issue is the responsibility of the ACCC and the Reserve Bank’. She noted that regulatory overlay exists within the payments space, suggesting it is ‘a reflection of the way that technology has advanced’.88
The ACCC launched a formal investigation in late 2021 into whether Apple’s mobile device architecture (that limits direct payments initiated from the operating system from cards unless they are stored in its own digital wallet) breaches competition laws.89
FinTech Australia’s submission encouraged testing and support for Bluetooth Low Energy (BLE) as an alternative to NFC in Australia, describing the technology as bypassing ‘the need to force hardware manufacturers to open access to their secure components’, namely NFC.90
The committee was told of other technological developments that could overcome the need for regulating third-party access to the NFC antenna. For example, CPA Australia submitted that blockchain (a digital ledger that securely records transaction data) and cryptocurrencies (a digital currency that operates independently of a central bank) were likely to play significant roles in the future of the payments system.91
BNPL provider, Afterpay, has publicly called for an Australian dollar stablecoin (cryptocurrencies backed by a reserve asset or fiat currency) that would reduce transaction costs by bypassing intermediary banks.92
EY also told the committee that an Australian central bank digital currency (a digital currency issued by the central bank) could significantly accelerate
cross-border transactions.93

Committee view

The committee notes the imbalance in bargaining power between payment platform providers and other participants in the payments ecosystem. Nevertheless, the observation that the market power of digital wallet platforms, such as Apple Pay and Google Pay, is causing banks to be
price-takers may not automatically trigger the need for regulation. Such situations are common in modern capitalist economies like Australia and within the payments system, specifically. For example, major banks have significant market power leading to other participants in the payments system being price takers for interchange fees and credit card interest rates. Card networks and some BNPL providers also have market power that causes other participants to be price-takers. Therefore, the case for regulating the market power of digital wallet platforms would need to establish why that is different or is creating more problems than other situations of market power in the payments system, and the economy more generally. In sum, the committee considers the existence of a strong market position by one or more companies may not necessarily require regulatory attention.
The committee also wishes to see the minimum regulation required to ensure an appropriate balance between promoting competition and growth, while ensuring consumer benefits, protections, and stability.
The committee also notes comparisons drawn during the inquiry between competition issues in the mobile payments space and the issues which the News Media Bargaining Code seeks to address. At this stage, the committee is not convinced that the reduction in interchange fees that may result from adopting a similar model for the payments system is comparable to the public good served by the media bargaining code in promoting Australians’ access to news and information.
The committee is of the view that mobile payment processing platforms, like Apple Pay and Google Pay, are part of the payments ecosystem. The committee is therefore broadly supportive of a national interest trigger that would grant the Treasurer additional powers to direct and designate firms as participants in the payments system, thereby bringing them into the regulatory fold, as recommended in the Farrell Review. However, the committee did not receive much evidence on the regulations to which payment platform providers are currently subjected, such as privacy law, telecommunications law, and consumer law, and what specific regulatory gaps exist today or may emerge in the future. The committee therefore recommends Treasury consult with relevant agencies to provide more detailed policy advice on the merits of regulating payment platform providers, and the best ways to do so.
In the committee’s view, Apple and Google’s app stores—and perhaps some online sales platforms as well—have used their market dominance to impose unbalanced terms and conditions on the businesses and developers that rely on them and work through them. Yet, the committee is mindful that regulators should seek to strike an appropriate balance between promoting competition and fostering innovation in app stores, while allowing these platforms to be profitable and differentiate themselves from one another. As such, the committee is not convinced that regulatory intervention is currently required in the case of Apple’s App Store or Google’s Play Store. Rather, the committee welcomes the ACCC’s ongoing inquiry into app marketplaces and looks forward to the Commission’s recommendations on these issues.
With respect to third party access to the NFC chip, the committee considers further scrutiny by the ACCC of Apple’s approach is merited. As such, the committee welcomes the ACCC’s recent announcement on this front and endorses the nuanced approach the Commission has taken on these issues over recent years.
The ACCC inquiry should draw on lessons from other jurisdictions—in particular Germany and the EU. Yet, while the committee heard no evidence to suggest security on Google Pay’s use of HCE was insecure, the committee notes Apple’s alternative hardware-based approach to payment security may be an important distinguishing feature for consumers in the future. The committee also notes Apple’s claims that Australians may have purchased Apple products knowing and accepting the restrictions and features that are inherent to this platform. The committee is therefore of the view that these choices should be respected—as far as it is practical to do so—rather than undermined through possible regulatory overreach.
Further, the committee notes that granting access to the NFC antenna on Apple devices through regulation or legislation introduces questions of what fees are appropriate for Apple to charge to those who use its platform. These questions do not yet appear to have been resolved in other jurisdictions in such a way as to effectively foster competition or innovation. Moreover, in the committee’s view, having two different models (Apple’s hardware approach to security and the software-based solution adopted by Google) adds to the resilience of the overall payments system and is thus worth preserving, if feasible. Finally, the committee is of the mind that Apple’s control over the NFC antenna provides it with a product that is distinct from its closest rivals and may therefore be considered a positive example of innovation and competition in the payments space.
For these reasons, the committee does not recommend Apple be forced to grant direct operating-system-level third-party access to its NFC antenna at this time. The ACCC’s attention to these matters is nevertheless warranted to monitor Apple’s practices and policies to ensure its behaviour and decisions do not unduly disadvantage Australian businesses, stifle innovation, or harm consumer interests.
The committee notes that Apple—despite its centrality to many of the issues addressed throughout this inquiry—declined to participate in any public hearings. In the committee’s view, this reluctance served neither Apple’s interests nor those of Australian consumers who have purchased Apple products and are entitled to hear directly from the technology firm on these matters. The committee nevertheless notes Apple’s constructive engagement with this inquiry through its public submission, supplementary submission, and answers provided to questions on notice.
The committee notes with disappointment the Government direction that limited the ACCC from looking into competition issues related to the conduct of payment platform providers. The committee encourages the government to support the ACCC to pay greater attention to the issues identified in this chapter and investigate emerging issues quickly to ensure device manufacturers and payment platform providers do not unduly restrict innovation and competition or harm consumer interests.
Finally, the committee is mindful of the rapid technological changes impacting the payments ecosystem. These changes will likely bypass the need for legislative or regulatory action in some areas, while introducing new areas of concern related to competition in the payments space. Regulators will therefore need to remain nimble and responsive, while legislators should focus on solutions that are as technologically neutral as possible.

Recommendation 9

The committee recommends Treasury consult with relevant agencies to provide policy advice on the merits of regulating payment platform providers as participants in the payments ecosystem, including:
setting out the laws to which these providers are already subject;
detailing the specific regulatory gaps that exist today or may emerge in the future; and
providing advice on the best ways of including payment platform providers within existing payment system regulation.
The committee intended to recommend the ACCC conduct an investigation into restrictions on the use of near-field communication chips on mobile devices. The committee instead welcomes the Commission’s recent announcement of an investigation into this issue and looks forward to the findings. While the committee has not been provided with details of this investigation, it would welcome further attention to the following:
the consumer harms or benefits that may result from Apple’s current restrictions on third party access to the NFC chip;
the issues related to competition and innovation that result from Apple’s current restrictions;
whether similar practices related to Apple’s strong market position are tolerated in other sectors and industries, or whether this is unique to the payments space; and
the limitations and opportunities that exist for developers to route payments within their applications through payment platforms other than Apple Pay.

Recommendation 10

The committee recommends the Australian Competition and Consumer Commission investigation into Apple’s restrictions on direct third party access to the chips that enable mobile payments on its devices consider:
consumer harms and benefits;
the impact on competition and innovation;
the extent to which similar practices exist in other sectors and industries; and
whether developers have practical and viable alternatives to using Apple Pay to process mobile payments.

  • 1
    Philip Lowe, ‘Innovation and Regulation in the Australian Payments System’, Address to the Australian Payments Network, Reserve Bank of Australia, 7 December 2020.
  • 2
    Australian Competition and Consumer Commission, Digital Platform Services Inquiry: Interim report no. 2: App Marketplaces, March 2021.
  • 3
    FinTech Australia, Submission 21, p. 4.
  • 4
    FinTech Australia, Submission 21, p. 4.
  • 5
    Ellen Cannon, ‘What Is Visa Checkout? How This Digital Wallet Used to Work’, NerdWallet, 19 January 2021, (accessed 21 June 2021); and Ellen Cannon, ‘Mastercard Masterpass: An Efficient Way to Shop Online’, NerdWallet, 19 January 2021, (accessed 21 June 2021).
  • 6
    Tony Richards, Christ Thompson, and Cameron Dark, ‘Retail Central bank Digital Currency: Design Considerations, Rationales and Implications’, in Bulletin, Reserve Bank of Australia, March 2020, p. 38.
  • 7
    EY, Submission 3, p. 9.
  • 8
    The remaining 1 per cent market share was attributed to Samsung and other unknown devices. See GlobalStats Statcounter, (accessed 5 July 2021).
  • 9
    GlobalStats Statcounter, (accessed 5 July 2021).
  • 10
    Australian Financial Industry Association, Submission 12, p. 3.
  • 11
    Commonwealth Bank of Australia, Submission 10, p. 5.
  • 12
    Commonwealth Bank of Australia, Submission 10, p. 6.
  • 13
    Mr Matt Comyn, CEO, Commonwealth Bank of Australia, Committee Hansard, 27 July 2021, p. 2 and 4.
  • 14
    Commonwealth Bank of Australia, answers to questions taken on notice on 27 July 2021, Market statistics, p. 2.
  • 15
    Apple, Submission 20.1, p. 4.
  • 16
    Mr Mark Britt, CEO Beem It, Committee Hansard, 26 July 2021, p. 28.
  • 17
    Ms Rebecca Schot-Guppy, CEO, Fintech Australia, Committee Hansard, 27 July 2021, p. 31.
  • 18
    Dr Lien Duong, Dr Duc-Son Pham, Professor Grantly Taylor, and Dr Baban Eulaiwi, Submission 1, p. 5.
  • 19
    Australian Competition and Consumer Commission, Submission 11, pp. 6-7.
  • 20
    Australian Competition and Consumer Commission, Digital Platform Services Inquiry: Interim report no. 2: App Marketplaces, March 2021.
  • 21
    Dr Lien Duong, Dr Duc-Son Pham, Professor Grantly Taylor, and Dr Baban Eulaiwi, Submission 1, p. 5.
  • 22
    Reserve Bank of Australia, Submission 8, p. 5.
  • 23
    Epic Games, Submission 15, p. 3.
  • 24
    Dr Jana Schmitz, Technical Adviser, Assurance and Emerging Technologies, CPA Australia, 27 July 2021, p. 14.
  • 25
    Ms Rebecca Schot-Guppy, CEO, Fintech Australia, Committee Hansard, 27 July 2021, p. 31.
  • 26
    Ms Rebecca Schot-Guppy, CEO, Fintech Australia, Committee Hansard, 27 July 2021, p. 31.
  • 27
    Dr Lien Duong, Committee Hansard, 27 July 2021, p. 23.
  • 28
    Australian Communications and Media Authority, News media bargaining code, (accessed 23 August 2021).
  • 29
    Commonwealth Bank of Australia, answers to questions taken on notice on 27 July 2021, Media Bargaining Code, (received 21 September 2021).
  • 30
    Commonwealth Bank of Australia, answers to questions taken on notice on 27 July 2021, Media Bargaining Code, (received 21 September 2021).
  • 31
    See, for example, Dr Lien Duong, Dr Duc-Son Pham, Professor Grantly Taylor, and Dr Baban Eulaiwi, Submission 1, p. 2.
  • 32
    Australian Financial Industry Association, Submission 12, pp. 2-3.
  • 33
    Epic Games, Submission 17, pp. 6-7.
  • 34
    Epic Games, Submission 17, pp. 7-8.
  • 35
    Epic Games, Submission 17, p. 8.
  • 36
    Google, answer to question on notice, taken on 26 July 2021, QoN 02 (received 16 August 2021).
  • 37
    John Davidson, ‘No quick answer to Google and Apple’s app store shakedowns: ACCC’, Australian Financial Review, 24 August 2021.
  • 38
    Australian Competition and Consumer Commission, Submission 11, p. 4.
  • 39
    Match Group, Submission 13, p. 2.
  • 40
    Epic Games, Submission 17, p. 1.
  • 41
    Restaurant & Catering Australia, Submission 6, p. 2.
  • 42
    EY, Submission 3, p. 8.
  • 43
    Australian Competition and Consumer Commission, ‘ACCC seeks leave to appear in Epic v Apple appeal’, media release, 10 May 2021, (accessed 11 June 2021).
  • 44
    Epic Games, Submission 17, p. 8.
  • 45
    Mr Tom Leuner, Executive General Manager, Mergers, Exemptions and Digital, ACCC, Committee Hansard, 27 July 2021, p. 27.
  • 46
    Mr Matt Comyn, CEO, Commonwealth Bank of Australia, Committee Hansard, 27 July 2021, p. 1.
  • 47
    Ms Rebecca Schot-Guppy, CEO, Fintech Australia, Committee Hansard, 27 July 2021, p. 31.
  • 48
    Ms Rebecca Schot-Guppy, CEO, Fintech Australia, Committee Hansard, 27 July 2021, p. 31.
  • 49
    Ms Rebecca Schot-Guppy, CEO, Fintech Australia, Committee Hansard, 27 July 2021, p. 32.
  • 50
    Ms Lucinda Longcroft, Director of Government Affairs and Public Policy for Australia and New Zealand, Google, Committee Hansard, 26 July 2021, p. 51.
  • 51
    Google, answer to question taken on notice on 26 July 2021, QoN 01 (received 17 August 2021).
  • 52
    Matthew Drummond, 'Why Tim Cook thinks Australia is a perfect tech breeding ground', Australian Financial Review, 20 August 2021.
  • 53
    Matthew Drummond, 'Why Tim Cook thinks Australia is a perfect tech breeding ground', Australian Financial Review, 20 August 2021.
  • 54
    Australian Competition and Consumer Commission, Digital Platform Services Inquiry: Interim report no. 2: App Marketplaces, March 2021, p. 5 (emphasis in original).
  • 55
    John Davidson, ‘Apple and Google told to open up app stores, or else’, Australian Financial Review, 28 April 2021.
  • 56
    Australian Retailers Association, Submission 5, p. 2.
  • 57
    Australian Retailers Association, Submission 5, p. 2.
  • 58
    Australian Retailers Association, Submission 5, p. 2.
  • 59
    Apple, answer to written question on notice (QoN001-01) (received 23 July 2021).
  • 60
    Mr Matt Comyn, CEO, Commonwealth Bank of Australia, Committee Hansard, 27 July 2021, p. 3.
  • 61
    Mr Lance Blockley, Managing Director, The Initiatives Group, Committee Hansard, 26 July 2021, p. 11.
  • 62
    Apple, Submission 20.1, p. 2.
  • 63
    Apple, Submission 20.1, p. 3.
  • 64
    Australian Competition and Consumer Commission, Submission 11, p. 2. See also Australian Competition and Consumer Commission, Digital Platform Services Inquiry: Interim report no. 2: App Marketplaces, March 2021, p. 342.
  • 65
    Mr Tom Leuner, Executive General Manager, Mergers, Exemptions and Digital, ACCC, Committee Hansard, 27 August 2021, p. 27.
  • 66
    Professor Grantley Taylor, Committee Hansard, 27 July 2021, p. 22.
  • 67
    Apple, Submission 20, p. 6.
  • 68
    Apple, Submission 20, p. 1.
  • 69
    Apple, Submission 20, p. 2.
  • 70
    Apple, Submission 20, p. 3.
  • 71
    Apple, Submission 20, pp. 5-6.
  • 72
    Apple, answer to written question on notice (QoN001), (received 23 July 2021).
  • 73
    Apple, answer to written question on notice (QoN001), (received 23 July 2021).
  • 74
    Google, Submission 15, p. 5.
  • 75
    Google, Submission 15, p. 5.
  • 76
    Ms Diana Layfield, Vice-President, Product Management and Partnerships, Google, Committee Hansard, 26 July 2021, p. 49.
  • 77
    Reserve Bank of Australia, Submission 8, p. 5.
  • 78
    Australian Financial Industry Association, Submission 12, p. 3.
  • 79
    Apple, answer to written question on notice (QoN001-01), (received 23 July 2021); and Apple, Submission 20.1.
  • 80
    Dr Anthony Richards, Head of Payments Policy Department, Reserve Bank of Australia, Committee Hansard, 26 July 2021, p. 5.
  • 81
    Australian Competition and Consumer Commission, Digital Platform Services Inquiry: Interim report no. 2: App Marketplaces, March 2021, p. 59.
  • 82
    Mr Marcus Bezzi, Executive General Manager, Specialist Advice and Services, Australian Competition and Consumer Commission, Committee Hansard, 27 July 2021, p. 15.
  • 83
    Mr Tom Leuner, Executive General Manager, Mergers, Exemptions and Digital, Australian Competition and Consumer Commission, Committee Hansard, 27 July 2021, p. 24.
  • 84
    Department of the Treasury, Competition and Consumer (Price Inquiry—Digital Platforms) Direction 2020, 10 February 2020, section 4, p. 2.
  • 85
    Mr Tom Leuner, Executive General Manager, Mergers, Exemptions and Digital, Australian Competition and Consumer Commission, Committee Hansard, 27 July 2021, p. 27.
  • 86
    Mr David Pearl, Assistant Secretary, Department of the Treasury, Committee Hansard, 27 July 2021, p. 36.
  • 87
    Mr David Pearl, Assistant Secretary, Department of the Treasury, Committee Hansard, 27 July 2021, p. 36.
  • 88
    Ms Nghi Luu, Assistant Secretary, Markets Group, Department of the Treasury, Committee Hansard, 27 July 2021, p. 36.
  • 89
    James Eyers, ‘ACCC investigating Apple Pay restrictions on banks’, Australian Financial Review, 13 September 2021.
  • 90
    FinTech Australia, Submission 21, p. 5.
  • 91
    CPA Australia, Submission 19, p. 9.
  • 92
    James Eyers, ‘Afterpay calls for $A ‘stablecoin’ policy to cut payment costs’, Australian Financial Review, 8 September 2021.
  • 93
    EY, Submission 3, p. 11.

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