At least a quarter of Australian consumers are being prevented from making mobile payments on their smartphones thanks to little more than the self-serving stubbornness of Australia’s three biggest banks.
If you’re an iPhone user who banks with the Commonwealth Bank of Australia, Westpac or NAB, then there’s no way around it: your so-called ‘digital wallet’ is completely useless.
Given 45 per cent of us use iPhones, and 60 per cent of us bank with one of those three institutions, that means at least 27 per cent of us are shut out from using this cutting edge technology entirely.
But if you’re not one of these 27 per cent of Aussies – if you use Android or bank with ANZ or Bendigo – then congratulations are in order: if you haven’t already, the chances are you can activate your digital wallet right now, and start paying for things with your phone while your iPhone-using, CBA-banking friends look on in despair.
The reason for this shut out is a squabble between Apple and Australia’s three biggest banks that has been going on for several years. And the fact is, if CBA, NAB or Westpac wanted to rectify the situation, they could do so pretty much immediately.
Apple is not blameless in all this either. But the fact is the Silicon Valley behemoth is holding all the cards, and the big three banks’ stubbornness (credit to ANZ for not joining in on this) is almost certainly futile, and only harming their customers.
Hang on – what’s a digital wallet?
A digital wallet is a function that allows you to use your smartphone the same way you use your debit or credit card to make contactless payments.
Say you have a Samsung Galaxy phone and bank with ANZ. The first step is to download the ‘Samsung Pay’ app, and then load your ANZ debit card details into it.
Then, the next time you are doing your grocery shopping, when it comes time to pay, you open the app, authenticate with your fingerprint or code, and tap your phone the way you would normally tap your card.
Samsung users have the option of at least two digital wallet apps: Samsung Pay and Google Pay. Google Pay works with all Android phones, not just Samsung. Given Android’s open architecture, users can also use banks’ own digital wallets such as NAB Pay or CBA’s Tap and Pay.
But iPhone users are limited to Apple Pay. Unlike Android, Apple refuses to allow banks to build their own digital wallet apps for the iPhone operating system iOS. And that’s the problem.
The ‘Near-Field Communication’ controversy
Of the big three, NAB is the most stubborn. Even now NAB customers can’t use Google Pay or Samsung Pay, let alone Apple Pay.
That’s because NAB has invested a lot in its own digital wallet, NAB Pay, which runs on Android – and has, for the record, won awards.
If NAB Pay were to run on iPhone, Apple would need to give NAB access to its near-field communication (NFC) chip. That’s the chip in the phone that can read the receptors on contactless payment machines.
Apple refuses to do this, on what it claims are security grounds (though it probably has just as much to do with locking iPhone users into Apple’s way of doing things). It insists that if NAB wants to let its customers make mobile payments via iPhone, it will have to sign up to Apple Pay. Competition watchdog the ACCC has supported Apple’s position on this.
So why won’t NAB give it up? The bank wouldn’t give a reason, simply saying: “Unfortunately, Apple has blocked NAB from providing its wallet on iOS devices.”
That means we can only speculate. It could be that NAB doesn’t want to pay Apple for the privilege of using Apple Pay – which it would have to do, though it probably wouldn’t be much.
More likely it simply wants to keep control of the whole process for marketing and/or customer retention purposes. Either way, both NAB and Apple appear intransigent.
The outlook for Westpac customers is better. A spokesperson for the bank told The New Daily: “Westpac is always looking at ways to enhance its banking services and we remain open to offering Apple Pay to customers.”
CBA did not provide comment. However its announcement this week that it had signed up to Samsung Pay has prompted speculation it may be softening its stance.
A report released this week found one in five iPhone users were picking their bank based on whether it offered Apple Pay. And considering the sheer size and clout of Apple, the pressure is squarely on the banks to yield and sign up to Apple Pay.
But who knows? Perhaps the self-serving stubbornness of three Aussie banks is what it will take to smash open the biggest company in the world’s infamously, fiercely undemocratic operating system.