Apple Pay in Australia faced significant resistance from the country’s largest banks as Apple attempted to expand its mobile payment service internationally. Although Apple entered the Australian market through a partnership with American Express, the lack of agreements with major banks meant that a substantial portion of consumers with Visa and Mastercard cards could not initially use the service.
Transaction economics were at the center of the disagreement. Australian banks had already invested heavily in building a mature contactless payments infrastructure and were reluctant to surrender a portion of transaction revenue to Apple. With consumers already accustomed to tapping contactless cards at checkout, banks also had a stronger negotiating position because Apple Pay offered less of a technological leap than it did in markets where contactless payments were less established.
Last month, Apple announced that it was launching Apple Pay in a number of new markets around the world including Australia through a deal with American Express. However according to reports from Australia, Apple is struggling to convince Australian banks to sign up for the mobile payment service over the cut Apple will receive in transaction fee revenue and enable Visa and MasterCard cardholders to participate.
To date, Apple has yet to strike a deal with any of the four main banks (ANZ, National Australia Bank (NAB), Commonwealth Bank and Westpac), meaning that about 80% of the consumer base cannot use Apple Pay. Commenting on the reports, Foad Fadaghi, managing director of technology research firm Telsyte said,
“The banks here feel like they’ve done the hard work in bringing contactless payments already to Australia and Apple is just going to come in…and eat their lunch.”
The reports from Australia are not new, the same was said in the UK and reports suggest Chinese banks have also pushed back on Apple regarding transaction fees. The Australian case study might be most similar to the UK where contactless card use is rapidly growing and strengthening the bargaining position of the banks. While Apple did eventually agree with most banks in the UK and will do so in Australia, it does show that Apple does not have the same power that it does in the United States.
Apple Pay in Australia demonstrates how local banking relationships and payment economics can influence the international expansion of a global digital wallet. Apple’s brand strength and large customer base did not automatically give the company the same negotiating leverage it enjoyed with financial institutions in the United States.
Similar disputes in the UK and other markets suggest that banks with established contactless payment systems may be more willing to challenge Apple’s terms. While broader bank participation could eventually expand Apple Pay adoption, reaching those agreements may require Apple to adapt its business model to the economics and competitive dynamics of individual markets.
Overview by Tristan Hugo-Webb, Associate Director, Global Payments Advisory Service at Mercator Advisory Group
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