Apple says the banks are just whingeing about cost of Apple Pay

Apple says the fees it charges Australian banks for using Apple Pay are not a money making exercise, and should be regarded as good value given the tech giant’s digital wallet reduces fraud rates and improves payment experiences for people who transact on iPhones.

At a parliamentary hearing, Daniel Mulino, who is chairing the House economics committee, raised regulatory concerns about a lack of transparency around the fees – worth more than $110 million a year – and potential changes to them.

But Apple legal vice president Kyle Andeer rejected any suggestion the fees amounted to gouging, and said Apple has not changed its fee structure. “It was set very low at the time, and it remains very low,” he said. He pledged to provide the committee with detail about the fees, subject to an assessment of confidentiality clauses in its contracts.

Apple said it had no plans to enter lending or savings accounts in Australia, citing a complex regulatory environment. Bloomberg

“This is not something that is a profit generator for Apple,” he said.

In a series of questions by committee member Andrew Charlton, probing whether Apple’s intentions for financial services extend beyond payments, Apple declared it had no current plans to provide buy now, pay later loans, similar credit products, or savings accounts in Australia despite offering these in the US market. Local banks are nervous about Apple making moves into their core area of banking products on the back of the popularity of Apple Pay.

But Mr Andeer cited Australia’s “very different” laws and regulations, and said Apple would prefer to learn and assess how the new banking products are received in the US before rolling them out elsewhere. Australia “is not a market we have been quick to enter, as it is a challenging regulatory structure and not one you want to rush into”, he said.

He also ruled out Apple creating a stablecoin or cryptocurrency, after PayPal launched a US-dollar stablecoin earlier this month: “It is an interesting market but not one we have plans to enter into,” Mr Andeer said. Nor does Apple want to create new payment “rails” to compete with Visa and Mastercard, given the extensive regulation in that space.

Rather, the focus is on Apple Pay, which has more than 6 million users in Australia and a share of the total card payment market of “less than 15 per cent”, the Apple VP told the committee on Tuesday via a video link.

He said Apple had invested “hundreds of millions of dollars” in hardware and software on the iPhone to reduce fraud rates and had set fees at a standard rate for banks around the world.

Pricing, which has never been disclosed by Apple, was partly based on cost savings for banks, he said, “and, in fact, we underestimated, as we see the fraud rates for use of Apple Pay lead the industry. They are incredibly low, so there is a real benefit to financial institutions having customers use Apple Pay as opposed to physical cards.”

He reiterated arguments Apple made in a recent submission to Treasury, which is considering additional powers for the Reserve Bank to capture Apple in its payments regulation and potentially expose it to price or access rules and data reporting. Holding up his leather wallet, he said Apple Pay was merely a digital representation of a physical wallet, which is not regulated.

“We have taken a physical wallet and offer it in a different version on the iPhone,” he said. “We don’t offer payments services in Australia, we don’t offer any financial services in Australia, we are really simply a [card] presentment method for banks.”

Dr Mulino pushed him on the analogy, suggesting physical wallets don’t charge banks opaque fees and result in users questioning how data is being stored.

“We don’t know what you are buying or who you are buying it from,” Mr Andeer assured the committee. “We don’t maintain that data here at Apple: it stays on your device.” He said he would need to check whether Apple held data on the number of transactions at an individual level, but didn’t believe this to be the case.

Google told the same committee it does not monetise any of the payments data generated by its digital wallet, Google Pay, which is available on Android devices.

Lucinda Longcroft, Google’s head of government and regulatory affairs, said arguments made by Google that it is not a payment service provider were not a question of semantics, as Dr Mulino had suggested.

“Google Wallet is a technology platform,” she said. “We don’t store customers money, and we don’t monetise Google Wallet by charging fees to customers or banks, and we don’t make any money from the data produced in the digital wallet.”

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