The Apple Pay antitrust lawsuit brought by Affinity Credit Union raised questions about Apple’s control over contactless payments within its tightly managed device ecosystem. The complaint alleged that Apple effectively required iPhone, Apple Watch, and iPad users to rely on Apple Pay for NFC-based payments while preventing competing digital wallets from accessing the same technology. Android devices, by comparison, allowed consumers to choose among multiple NFC-enabled wallets.
Apple’s approach also had financial implications for card issuers. Banks and credit unions participating in Apple Pay paid transaction-based fees to Apple, while competing wallets operating on Android devices did not necessarily impose comparable costs. The lawsuit argued that restricting NFC access reduced competition, limited consumer choice, and weakened Apple’s incentive to improve Apple Pay’s functionality and security.
Apple was sued earlier this week by a small credit union who accuses them of creating a non-competitive environment surrounding the Apple Pay digital wallet. Jonathan Stempel at Reuters reports further:
“According to a complaint filed in San Francisco federal court, Apple “coerces” consumers who use its smartphones, smart watches and tablets into using its own wallet for contactless payments, unlike makers of Android-based devices that let consumers choose wallets such as Google Pay and Samsung Pay.”
As Mercator has covered in the past, including my latest overview of the digital wallet space in June, Apple operates in a closed garden environment, restricting access to their wallet technology and NFC (Near Field Communication) chips. In contrast, Android devices operate in an open environment, allowing for multiple digital wallets to access the NFC chips within phones using the Android OS and with no direct costs back to either Google or the phone manufacturer. Apple currently charges 15 basis points on credit card transactions and half a cent on debit card transactions processed through Apple Pay resulting in them collecting more than $1 Billion in fees according to the lawsuit.
The plaintiff, Affinity Credit Union of Iowa, argues that Apple’s approach not only harms financial institutions, but also harms consumers utilizing the digital wallet by not allowing for personal choice that could result in using a product consumers feel is superior in either security or functionality.
“Apple’s conduct minimizes the incentive for the Cupertino, California-based company to make Apple Pay work better and make it more resistant to security breaches. ‘Apple’s conduct harms not only issuers, but also consumers and competition as a whole,’ the complaint said.”
The lawsuit follows similar actions in Europe where regulators also argue that Apple’s digital wallet does not provide a competitive environment. Affinity is seeking class action status in its complaint.
The Apple Pay antitrust lawsuit highlights the broader tension between Apple’s tightly controlled ecosystem and demands for greater competition in digital payments. Control over NFC access gives Apple significant influence over which wallets can offer contactless payments on its devices while potentially generating substantial transaction revenue from participating financial institutions.
Similar regulatory concerns in Europe suggest the issue extends beyond a single U.S. lawsuit. If courts or regulators require greater access to Apple’s NFC technology, competing digital wallets could gain new opportunities on iOS devices, potentially reshaping competition among Apple, financial institutions, and other mobile payment providers.
Overview by Jordan Hirschfield, Director, Prepaid Advisory Service at Mercator Advisory Group
