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Some context: Australia is different because they regulate interchange fees. Credit card interchange averages 0.5% / max 0.8% [1] whereas in the U.S. it's in th

by abalone 10y ago

Some context: Australia is different because they regulate interchange fees. Credit card interchange averages 0.5% / max 0.8% [1] whereas in the U.S. it's in the range of 1.4-2.4% + 5-10 cents.[2] So that's part of the reason banks are more aggressive with their negotiation. There's less of a pie to slice up. Some more context.. This is a game with 3 main actors: banks, merchants and consumers. Apple's strategy was a smart one vis-a-vis Bitcoin and other "low fee" efforts. While many payment startups have attempted to woo merchants to adopt them with the promise of a lower-fee system, Apple focused on wooing consumers and banks by fully supporting the current, higher-fee interchange system. Banks get their higher fees and consumers get their rewards. Merchants get some security benefits (not as vulnerable to data breaches), but they mainly face pressure from consumers to support it as an amenity. That's much more successful than something that's price-friendly to merchants but offers little advantage to consumers or banks. Problem is in Australia, thanks to regulation there is no "high fee" system to shore up for banks. So they are not as amenable to Apple Pay as in other countries. They want their own system in place so they can get the full 0.5% and, moreover, look for other ways to make money with it. [1] http://www.rba.gov.au/payments-and-infrastructure/review-of-card-payments-regulation/q-and-a/card-payments-regulation-qa-conclusions-paper.html http://www.rba.gov.au/payments-and-infrastructure/review-of-... [2] https://usa.visa.com/dam/VCOM/download/merchants/Visa-USA-Interchange-Reimbursement-Fees-2015-April-18.pdf https://usa.visa.com/dam/VCOM/download/merchants/Visa-USA-In...

kalleboo 10y ago
FWIW, the EU also caps interchange fees (0.3% for credit cards and to 0.2% for debit cards) but that doesn't seem to have stopped Apple Pay adoption in the UK.
- abalone 10y ago
  That's a very good point. Some possible explanations (let me know what you think): 1) Banks have healthier competition in the EU? They wouldn't be able to form a cartel like they are trying in Australia. 2) Fraud liability is fully borne by the consumer in Europe, whereas Australian banks still have to refund customers? 3) It's a very new change (December), whereas Australian banks have lived with it for a decade or so. Personally I think #1 is sufficient to explain it.
jn4 10y ago
Australian banks have a good thing going down under: they are the most profitable in the world in terms of profits as % of GDP. They may not make as much in payments but seem to have plenty of money making options. [1] http://www.news.com.au/finance/economy/australian-economy/australian-banks-top-global-list-as-labor-persists-in-demands-for-a-royal-commission/news-story/aefa72c371555ced47804f9604c25c7c http://www.news.com.au/finance/economy/australian-economy/au...
- chris_wot 10y ago
  Yeah, but they are also tightly regulated by APRA and when the GFC was happening and everyone else was worried about their banking system ours was stronger than ever.
Veratyr 10y ago
And for yet more context: - Australia already has widespread NFC payment terminals and has for years. My anecdotal estimate would put the terminals in Melbourne at ~95% accepting NFC. Everything from a McDonald's to a department store to a coffee shop accepts it. - NFC is a frequently used feature of many Australian credit cards (as in you wave the card itself at the terminal). - Many of the Australian banks already offer NFC payment apps on Android devices that cost nothing extra to the merchant or the consumer. And for some opinion: This has nothing to do with security. The banks want access to the iPhone for their apps. Apple wants access to the banks' users. The impression I got was that the banks may be willing to give Apple access to their users if Apple gives the banks access to their phones. Apple however doesn't just want to be a competitor in a free payments market on the iPhone, it wants to monopolise it like it always has.
- abalone 10y ago
  Of course it has something to do with security. First, Apple Pay secures all purchases with Touch ID. The only way to make NFC cards as convenient is to skip asking for PINs. That's less secure. Second, providing direct developer access to NFC on the phone would open up an attack surface. It would inevitably result in more hacks. I find it ironic that you are arguing monopolization when the issue is literally banks seeking to act as a cartel. Apple is not a monopoly. It has healthy competition in the form of Samsung.
  - iamshs 10y ago
    Exactly, banks are wanting to create a cartel here to define industry standards so that they can roll out their own silos. Each bank having its own shitty payment app. As if the ridiculous Poli payment stuff was not enough. My bank does not even have 2FA; will never trust them with security more than Apple.

by abalone 10y ago

kalleboo 10y ago

FWIW, the EU also caps interchange fees (0.3% for credit cards and to 0.2% for debit cards) but that doesn't seem to have stopped Apple Pay adoption in the UK.

abalone 10y ago
That's a very good point. Some possible explanations (let me know what you think): 1) Banks have healthier competition in the EU? They wouldn't be able to form a cartel like they are trying in Australia. 2) Fraud liability is fully borne by the consumer in Europe, whereas Australian banks still have to refund customers? 3) It's a very new change (December), whereas Australian banks have lived with it for a decade or so. Personally I think #1 is sufficient to explain it.

jn4 10y ago

Australian banks have a good thing going down under: they are the most profitable in the world in terms of profits as % of GDP. They may not make as much in payments but seem to have plenty of money making options. [1] http://www.news.com.au/finance/economy/australian-economy/australian-banks-top-global-list-as-labor-persists-in-demands-for-a-royal-commission/news-story/aefa72c371555ced47804f9604c25c7c http://www.news.com.au/finance/economy/australian-economy/au...

chris_wot 10y ago
Yeah, but they are also tightly regulated by APRA and when the GFC was happening and everyone else was worried about their banking system ours was stronger than ever.

Veratyr 10y ago

And for yet more context: - Australia already has widespread NFC payment terminals and has for years. My anecdotal estimate would put the terminals in Melbourne at ~95% accepting NFC. Everything from a McDonald's to a department store to a coffee shop accepts it. - NFC is a frequently used feature of many Australian credit cards (as in you wave the card itself at the terminal). - Many of the Australian banks already offer NFC payment apps on Android devices that cost nothing extra to the merchant or the consumer. And for some opinion: This has nothing to do with security. The banks want access to the iPhone for their apps. Apple wants access to the banks' users. The impression I got was that the banks may be willing to give Apple access to their users if Apple gives the banks access to their phones. Apple however doesn't just want to be a competitor in a free payments market on the iPhone, it wants to monopolise it like it always has.

abalone 10y ago
Of course it has something to do with security. First, Apple Pay secures all purchases with Touch ID. The only way to make NFC cards as convenient is to skip asking for PINs. That's less secure. Second, providing direct developer access to NFC on the phone would open up an attack surface. It would inevitably result in more hacks. I find it ironic that you are arguing monopolization when the issue is literally banks seeking to act as a cartel. Apple is not a monopoly. It has healthy competition in the form of Samsung.
- iamshs 10y ago
  Exactly, banks are wanting to create a cartel here to define industry standards so that they can roll out their own silos. Each bank having its own shitty payment app. As if the ridiculous Poli payment stuff was not enough. My bank does not even have 2FA; will never trust them with security more than Apple.