Reportedly, PayPal helped initiate an EU antitrust complaint against Apple. EU regulators announced that they have “informed Apple of its preliminary view that it abused its dominant position in markets for mobile wallets on iOS devices.” Apple is accused of limiting access to the NFC (Near-Field Communication) chip that’s used to make contactless payments on mobile devices.
Apple has always been particular about using NFC and allowing third-party companies to access the feature, and iPhone users could never scan or use NFC cards that Android users were able to train and customize to their liking. Apple is also accused of blocking developers from getting access to the NFC feature in the iOS software in order to dominate the market with its own service called Apple Pay.
For those unaware, Apple Pay is used to make contactless payments in shops, and it supports an enormous number of bank cards. It’s also used on other Apple devices, including Safari on Mac, and it’s also built into the Apple Watch, and iPads.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said:
“Mobile payments play a rapidly growing role in our digital economy. It is important for the integration of European Payments markets that consumers benefit from a competitive and innovative payments landscape. We have indications that Apple restricted third-party access to key technology necessary to develop rival mobile wallet solutions on Apple's devices. In our Statement of Objections, we preliminarily found that Apple may have restricted competition, to the benefit of its own solution Apple Pay. If confirmed, such a conduct would be illegal under our competition rules.”
It’s interesting to see PayPal on the list of companies against Apple (via Bloomberg), but it’s not exactly too surprising. While the move raised a few eyebrows, it’s worth keeping in mind that PayPal is a financial technology company, and it’s one of the most popular and used payment providers in the world.
It’s been well-known that PayPal wanted to take advantage of the contactless functionality when it was introduced, but it didn’t have a chance to stand up against the big companies such as Apple or Google. PayPal also has a tap-to-pay option that’s currently only available on Android devices, and it’s unsurprising to see the company line up against Apple in a move to make its own service available on iPhones and other Apple devices.
Apple defended its approach to refusing other third parties from offering a contactless payment solution by claiming that PayPal is still popular on iPhone, even without accessing the NFC chip to accept contactless payments. PayPal joins Square’s Cash app, Samsung Pay, and Google Pay on the list that is unavailable on iPhone due to Apple’s limitations.
Apple does not allow any other payment providers to have an app that could even remotely compete against its own Apple Pay solution, and it’s unlikely to open up in the future. Apple is also collecting a small fee after every transaction (0.15% on credit cards) made with Apple Pay, and it’s unlikely to give up a solid revenue stream without a battle.
It’s also worth pointing out that US merchants will soon be able to accept contactless payments on their iPhone, without requiring the use of a terminal or any other devices. The NFC chip in the iPhone will allow users to accept wireless payments from customers, and receive money directly onto their devices and accounts. The new feature is called Tap to Pay, and it will offer an easier way for business owners to manage and collect payment from customers, and avoid having to shell out for expensive third-party devices that Stripe, Shopify, and other companies sell.
NFC can only be used for things Apple allows
Apple previously opened up the NFC functionality, but only for the things, it deems beneficial. We announced back in February that the World Trade Center is one of the first places to replace physical keys with iPhones and Apple Watches, and it allows both employees and tenants to access fitness centers, office buildings, and amenity spaces using their iPhones and Apple Watch devices. Apple also announced at last year’s WWDC 2021, that it wants to allow people to unlock their homes, unlock their cars, and leave their IDs at home, as Apple Wallet received several updates in the past year.
Apple has a tight and carefully crafted walled garden
The above is a clear example that Apple is working on opening up the service, but it wants to keep a close eye and full control over what companies and technologies can take advantage of the NFC chip, and other sensors that are built into the iPhone, Apple Watches, and into the entire ecosystem. Apple has a tight and carefully crafted walled garden, and only special partners can access certain features with special privileges, which is giving the company more headaches in the past few years than ever before.
Will Apple allow third-party developers to use the NFC in the future?
Yes, but also no. Let me explain. Apple is continuously opening up the ecosystem that’s possible thanks to the use of NFC, and we can see that new cars, homes, offices, and even IDs can now be stored on the iPhone and Apple Watch and readily available when needed.
However, Apple is unlikely to allow other payment providers and financial services to take advantage of Apple Pay and similar functionalities and services as it would go directly against Apple’s own business. Apple is a carefully crafted business, solely focusing on maximizing profits, and Apple is keen to keep that walled garden as high as it is possible. As we've seen previously, Apple is also not afraid of paying hefty fines to prevent drastic changes to its operation and business model.
Even if the EU antitrust forces Apple to open up the NFC chip to businesses, Apple could introduce new policies to keep third-parties on a short leash, and prevent significant changes. Apple recently changed some of its policies, allowing the trillion-dollar company to collect in-app purchase fees even outside the App Store.