CommBank’s CEO accused the $2.5 trillion company of anti-competitive behaviour.
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At close of trade, shares in Australia’s largest bank were trading for $101.54 – up 0.54%. The S&P/ASX 200 Index (ASX: XJO), meanwhile, finished the day 0.04% lower.
The quarrel between the tech behemoth and the Australian banking giant originated from comments CommBank CEO, Matt Comyn, made at the Joint Parliamentary Committee Inquiry into mobile payments and digital wallets. Comyn said Apple’s practices in relation to mobile payments amounted to a “distortion” of the market.
Let’s take a closer look at his comments and Apple’s response.
CommBank v. Apple
Comyn’s main frustration with Apple is his claim that the company does not allow digital wallets on its mobile devices bar like its own Apple Wallet. He says Apple “restricts access to the [near-field communication] NFC chip”. He contrasts this with Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) and their Android devices.
On android systems, by contrast, multiple wallet apps coexist. At last count, around eight were available in Australia alone. These include ours as well as a number from our competitors, both new and established players. This provides Australians who own android devices with choice and forces Google and others to compete for those consumers’ business. Australians who use Apple devices should be able to make their own decisions about which features they prefer in a wallet app, as android users can, yet currently they cannot.
In its own written submission to the committee, Apple says the heat it gets for its NFC technology is “driven by companies seeking to mischaracterise Apple’s technical and customer-experience led approach for their own commercial gain.”
“Apple’s model [of restricting access to its NFC chips] is designed to ensure that all developers, including banks, car manufacturers, loyalty programs and others, have equal access to NFC,” the Silicon Valley giant added.
Apple then went on to say Comyn’s preferred Android model is in reality the anti-competitive option.
[The Android model] effectively gives one player (potentially a bank) sole control over NFC to the exclusion of their competition…
Allowing Commonwealth Bank to have sole control of the NFC controller would assist them in not only locking out competitors but also prevent innovation around non-bank use cases such as car keys or health insurance cards.
Despite this pointed criticism, the CBA share price ended the day in the green.
“The thought that a single provider could have 80 per cent market share in an individual market is usually cause for concern.”
Comyn told the committee that he expects the majority of payments made in Australia this year to be via tap and go options. He said Apple Pay makes up 80% of those payments.
The thought that a single provider could have 80 per cent market share in an individual market is usually cause for concern. I’d be the first to say [Apple] make fantastic products, but this is a company whose market cap is double Australia’s gross domestic product…
Apple also addressed this 80% claim in its submission.
Apple Pay has under a 10% share of all credit and debit card spend across Australia.
The misleading 80% figure shared initially by Commonwealth Bank and cited in future dialogue and media reports does not represent Apple Pay’s share of any market. It is simply the percentage of Apple Pay transactions from Commonwealth Bank’s overall digital wallet payments at point of sale. This high usage of Apple Pay amongst Commonwealth Bank customers only demonstrates how strongly consumers prefer the convenience, security and privacy provided by Apple compared to the model being advocated by the Commonwealth Bank.
The ugly spat appears to be having little effect on the CBA share price.
CBA share price snapshot
Over the past 12 months, the CBA share price has increased 46.5% while the ASX 200 is 23.3% higher at the same time. Year-to-date, Commonwealth Bank’s value appreciated 20.8%. The benchmark index lifted 12% since 1 January.
Commonwealth Bank has a market capitalisation of $179 billion.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.