Apple Pay’s Australian Rollout Stalls on Bank Negotiations (Aug. 18, 2015)
Apple Inc.’s plan to roll out Apple Pay soon in Australia—which has a high penetration of contactless cards and NFC terminals—has hit a snag as the country’s largest banks balk at paying the toll Apple requires, according to reports.
Australia seems like it would be a prime market for Apple Pay, with more than half of payment terminals NFC-ready and contactless payment card penetration high. The m-payments service has been live in the U.S. since last October, and launched last month in the U.K.; Australia and China reportedly were next. But Apple Pay’s arrival Down Under is taking longer than expected.
Apple collects a fee from banks that support Apple Pay. In the U.S., it’s reported to be 15 cents for every $100 spent on transactions using iPhone or Apple Watch. U.S. banks agreed to the toll, drawing on the 1 percent interchange fee banks receive from merchants in the U.S. In Australia, however, interchange rates are leaner and banks’ revenue from fees is lower—about half of what U.S. banks collect. Apple has been negotiating with Australia and New Zealand Banking Group (ANZ), Westpac, National Australia Bank and Commonwealth Bank of Australia, which together control about 85 percent of the country’s transaction volume, and so far is struggling to find a happy middle ground for all parties, according to a report in Australian publishing firm Fairfax Media.
Ironically, Australia’s relatively advanced payments landscape could be what’s holding Apple Pay back. Australia has one of the world’s highest levels of contactless card penetration and more than half of all POS terminals are NFC-enabled, according to the Australian Payments Clearing Association. Some banks, including Commonwealth Bank and Westpac, already offer contactless payment apps for Android handsets; Commonwealth also provides NFC stickers, enabling iPhone users to tap and pay.
“There is a functionality associated with Apple Pay that we have had in the market for 18 months to two years,” said Ian Narev, Commonwealth’s CEO, referring to apps enabling contactless payments, Fairfax Media reported.
It’s unknown how long it may take for Apple to come to an agreement with Australia’s leading banks, but a smaller bank may be first to adopt Apple Pay, some reports suggest. When it arrives, Apple Pay will meet a ready audience; Apple has a 40 percent share of the smartphone market, and 60 to 70 percent of transactions were contactless in early 2015, industry reports suggest.