Apple Pay adoption in Australia faces an unusual challenge despite the country’s strong concentration of iPhone users and enthusiasm for mobile technology. While the market would appear well positioned for Apple’s digital wallet, limited support from Australian banks and card issuers has restricted the number of consumers who can actually use the service.
At this stage, Apple Pay availability is largely tied to American Express, which presents another obstacle because Amex has lower merchant acceptance and can carry additional surcharges at some Australian retailers. Meanwhile, regulated interchange caps on Mastercard and Visa transactions leave issuers with less flexibility to absorb transaction-based fees associated with Apple Pay. These economic factors demonstrate how local payment regulations and issuer relationships can significantly influence the success of a global digital wallet.
In comparison to global statistics, Australia has a very high use of Apple phones, but Apple Pay is struggling to gain customers. As reported in ComputerWeekly, only Amex cardholders can use Apple Pay. Unfortunately for those customers, Amex is not widely accepted:
“…in Australia Amex remains the black sheep of the retail market, largely because high merchant fees drive many retailers to add 2%-3% surcharges for Amex purchases. Many others simply don’t accept the cards at all.”
Not surprisingly, the lack of banks’ embrace of Apple Pay has to do with money. The regulated interchange caps forced on MasterCard and Visa transactions, plus the belief that Apple is looking for a transaction based revenue share similar to what they enjoy in the US has stifled adoption:
Card issuers have little room to move given the Reserve Bank of Australia-enforced caps on MasterCard and Visa charges, and $A0.12 per debit-card transaction (these do not apply to Amex and Diners Club, which operate in Australia under different structures). These limits might push Australian retailers to pass on merchant fees to their customers, which would be a disincentive to the scheme’s widespread adoption.
This could lead to more bank-based, payment applications for the mobile – focused Australian market.
Apple Pay adoption in Australia shows that a large base of compatible devices does not necessarily translate into widespread mobile payment usage. Without broader participation from banks and card issuers, consumers have fewer opportunities to add their preferred cards and use Apple Pay for everyday purchases.
The situation could also create opportunities for Australian financial institutions to develop their own mobile payment applications rather than support a third-party wallet. Ultimately, Apple’s ability to expand in Australia will depend on finding a business model that works within the country’s regulatory environment while providing enough value for banks, merchants, and consumers.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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