The Australian government's intention to impose more regulations on Apple Pay, Apple Wallet, and other payment mechanisms is an overreach, Apple insists, with it potentially risking the security of its service.
The Commonwealth Bank of Australia and other financial institutions have pushed lawmakers to consider implementing new regulations that affects Apple Wallet, Apple Pay, and others in the industry. In comments unearthed on Monday, Apple is fighting back against the proposals.
Regulations under consideration would provide the Reserve Bank with more powers than the current 25-year-old legislation it currently uses, according to The Australian Financial Review, one which doesn't allow the RBA to impose rules on technology firms regarding smartphone access and price regulation.
If passed, the regulations will introduce a licensing scheme that would allow the RBA to interfere with digital payment mechanisms, such as the Apple Wallet.
For example, after years of banks demanding direct access to Apple's NFC system so their apps can handle payments directly instead of using Apple Wallet, the RBA could be compelled to force Apple into making changes to enable that access.
In its submission to the Treasury seen by the report, Apple argues that its Wallet is effectively a "digital reproduction of a physical wallet, and no more a payment system or participant than an actual physical wallet would be."
Apple further claims that the design of Apple Wallet is meant to be pro-competitive, since it allows smaller banks and fintech companies more access, as well as more choice in what card they use. Apple proposes that this competition is a key reason why major banks dislike the current setup.
Apple Pay is also discussed, with it being a limited player in the mobile payments system, and that Apple doesn't create financial or operational risks to banks.
"Apple's only role has been to develop the technical architecture that can be used by licensed financial institutions to offer their consumers a safer and more secure way to pay with their cards," Apple told the Treasury.
No "free riders"
In its own submission, the CBA doesn't want "free riders and loopholes that could be disproportionately exploited by overseas technology companies," and that regulators "should have the ability to regulate all participants that form part of the payments ecosystem." The Treasury also explicitly includes digital wallet makers as "participants" in payment systems.
However, Apple denies there has been any "demonstrated case" for intervention so far. Furthermore, it shouldn't be subjected to regulation since it doesn't actually provide financial services in Australia, such as Apple Card in the United States.
"Apple does not issue debit, credit or prepaid cards in Australia, nor does Apple acquire, process, authorise or execute transactions," Apple claims.
"Apple is neither an issuer nor an acquirer for existing regulated payments systems, and at no point does Apple handle a payer's money or have any control over any payments or transfer of value" the submission continued. "Apple Pay does not store any details of a cardholder's existing debit, credit or prepaid card and does not have access to a user's account to determine whether funds are available or store any value or funds."
The regulation proposal also introduces risks to make it tougher for new entities to enter the industry, in part due to unclear definitions. Apple offers that retailer Woolworth's could be subject to the same regulations due to its QR code-based rewards program, and so could third-party ATM operators and Google Chrome's autofill system.
"Regulating functions which only have an indirect and limited role is contrary to the objective of promoting greater competition, diversity, and innovation within the patent ecosystem," Apple insists.
In May, the CBA told the Treasury "Creating an environment where digital platforms are able to avoid regulation could see a hollowing out of domestic industry."