The boss of Australia’s largest bank calls out Apple for stifling competition.
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The Commonwealth Bank of Australia (ASX: CBA) share price is having a great day on the ASX share market today.
At the time of writing, CBA shares are up a very healthy 1.62% to back over $100 a share at $100.75. It’s the first time CBA has gone back over $100 a share since its slip into 2-digits at the end of last month.
It seems news that CBA might have a beef with one of the largest companies in the world isn’t bothering too many people today. Yes, CommBank is in a squabble with the formidable Apple Inc (NASDAQ: AAPL). That’s what a report in the Australian Financial Review (AFR) today tells us anyway.
According to the report, Commonwealth Bank CEO Matt Comyn has launched “an extraordinary broadside” against Apple. He has called on federal parliament to rein in the market power of the electronics giant.
Mr Comyn has told a parliamentary committee that Apple is abusing its market powers in the payments space and more regulation is necessary to ensure a level playing field.
Comyn’s comments relate to the Apple Pay payments system. This (according to Comyn) now accounts for 80% of iPhone ‘tap and go’ payments.
CBA orders beef with Apple
Apple Pay lets consumers use their ‘bank cards’ to pay for purchases. But the banks are not truly part of the payment process per se.
Instead, the Apple Wallet app restricts all near field communication (NFC) activity to itself. This means that banks have to go through Apple as the ‘middleman’ of sorts when the customer makes a purchase. Apple, naturally, clips the payment ticket on the way through.
It’s this situation that has got Mr Comyn’s goat. Here’s some of what he told the committee:
Without access to the NFC, it is not even possible to have a competing service…
[Concerns with the power of Apple and Google’s app stores are] consistent with our experience… Manufacturers of mobile handsets and associated software set the terms on which third parties can offer these app-based services, particularly with respect to payments for, and via, these services. They also can restrict apps that provide services that compete directly with those supplied by the manufacturer of the mobile device.
The ability for mobile phone providers to restrict competing services accessed through the app store will inevitably lead to distortions in markets for services provided through mobile apps. These distortions will only intensify if left unaddressed…
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.
Apple Pay-s itself first?
However, Apple has rejected Mr Comyn’s criticisms. It submitted its own set of answers to the committee. The report states that Apple told the committee that “its NFC architecture was available to all banks on non-discriminatory terms”.
Apple also stated that its app was “pro-competition and allowed the consumer to choose which cards to favour in the app”. It also said that large banks pay the same fee as smaller companies to access the wallet.
Mr Comyn was not satisfied with this answer, calling it “selective interpretation”.
He reiterated CBA’s position that Apple’s market power and its employ “should be of growing interest to the Australian Parliament”.
It will be interesting to see what comes out of this committee in light of Mr Comyn’s comments.
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Motley Fool contributor Sebastian Bowen 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 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 Apple. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.