Apple slams bank ‘hard core cartel’ on mobile payment

CBA, NAB, Westpac and Bendigo want ACCC ­approval to negotiate jointly with Apple.

BCA’s incoming president Grant King. Illustration: Sturt Krygsman.

Apple has come out shouting, slamming the big banks as exhibiting “hardcore cartel” behaviour and being more interested in promoting their own systems than in promoting competition in mobile payments.

In a submission to the Australian Competition and Consumer Commission inquiry into Apple Pay, the tech giant said “the only plausible explanation for the ­applicant banks’ behaviour … is they would prefer a situation where the only payment apps available to consumers in Australia are the banks’ own proprietary apps”.

CBA, NAB, Westpac and Bendigo are seeking ACCC ­approval to negotiate jointly with Apple, ­arguing there would be public benefit in a joint negotiation.

“Apple has never negotiated with any bank in the world to ­provide any modification to provide direct third-party access ... because doing so would undermine the security and simplicity of the Apple Play platform,” the tech company said. “Thus, allowing the applicant banks to form a cartel to jointly negotiate against Apple would not result in the outcomes sought by the banks and could therefore not lead to any of the claimed public benefits.”

Responding to the submission, Westpac’s Brian Hartzer said Apple’s refusal to allow the banks to talk is akin to blocking Google from accessing the GPS on phones and insisting people use Apple Maps instead of Google Maps.

The banks want the ability to put their own pay wallets on the Apple phones, arguing they could then choose between applications.

Hartzer also accused Apple of getting a free ride on the Australian payments system established through the banks’ own investment.

He was speaking after delivering a 7 per cent fall in net profit to $7.4 billion and a 185-basis-point fall in return on equity to 14 per cent.

The bank’s stock price jumped 2.7 per cent to $30.50 after it surprised by maintaining dividends at $1.88 a share, with what Hartzer said was a high payout ratio of 80 per cent.

Many in the market tip a cut to the dividend and suggest this will now happen in the first half of this financial year once the new capital rules are in place.

Hartzer declined to enter that debate, rightly saying a decision would come when the board knew what the new rules were and how they affected the bank. He also surprised many by forecasting returns on equity of about 13-14 per cent, well below the 23 per cent recorded in 2006.

Westpac recorded a return of 13.8 per cent last year, which was bang in line with the bank average, and the argument is that with 10-year bond yield at 2.3 per cent, even the reduced Westpac target is too high.

Hartzer obviously rejects the argument, saying the cost of ­equity is about 10-11 per cent and that the banks should get a premium due to their strong branded base.

Conversely, some argue the bank should be targeting a higher return than on offer now.

The reasons for the fall in returns include slower growth, lower returns on assets and increased deleveraging, which has subdued growth for the banks.

But Hartzer is still looking for growth from his strong consumer bank, business bank and wealth division.

Overall bank profits in the past year were down about 2.5 per cent to $29.6bn and margins fell eight basis points to 2.02 per cent.

The fight with Apple has split the banks: ANZ is opting to offer its customers Apple Pay, which it says has been a boon in terms of new customers, but it has declined to specify numbers other than to say demand for Apple Pay is high.

Apple said “none of the applicant banks had negotiated seriously with the company in the last two years and it cannot offer Apple Pay to their customers unless they come to terms with each applicant bank’’.

“This demonstrates the applicant banks are not actually interested in offering Apple Pay to their customers, which account for around 70 per cent of cardholders in Australia.’’

It has noted Apple Pay is available through 3500 issuers in 12 countries.

It says while the banks are trying to look after themselves, “it is not in the best interest of Australian consumers, (who) would otherwise benefit from the innovation and the dynamic competition caused by the expansion of Apple Pay, Android Pay and Samsung Pay”.

The ACCC is due to release a draft decision on the banks’ requests to jointly negotiate by the end of this month.

Apple made clear in its submission that even if authorisation was granted it had no intention of offering the banks any concessions, so it was meaningless.

Long live the King

Grant King’s appointment as the new president of the Business Council of Australia signals the BCA’s intention of maintaining its focus on detailed policy rather than street-fighting advocacy.

He is undoubtedly a safe pair of hands, but there will be disappointment among those advocating for the BCA to play a more activist role. King is not the person for that role.

His appointment also makes clear there is no sustained internal push to get rid of Jennifer Westacott and the new BCA team are, on the surface at least, ideally suited and share very similar characteristics with the same approach to public policy advocacy.

The BCA was criticised in the past election by both sides of politics and, while it took a more activist role than it normally does, its message didn’t get through to the electorate.

In part, this was the reality in Western democracy, where elites are treated with contempt, as shown with the Donald Trump ticket in the US and the British Brexit vote.

In part, it is also a failing of BCA members, because a lobby group is only ever as good as its membership and if big business wants a better voice, then this has to start at the individual company level.

The BCA is also attacked for being OK at delivering lectures about what it thinks needs to be done but not so good at listening to other points of view.

King has the ability to hear both sides of an argument but his detractors say this quality can come across as indecisiveness.

On a scale between the fast-talking Tony Shepherd and the quieter Catherine Livingstone, King would sit firmly in the ­middle.

He is passionate about public policy, the country, big business’s role in the country and he is a big believer in the rule of thumb that says that facts speak for themselves.

He is very well versed in BCA matters, given he has run a public company for the past 16 years and in that time has been an active member.

Working from the position the BCA is going to hold its course, King is an ideal choice given his extraordinary background, which includes 22 years as the founding chief executive of Origin Energy and an ability to talk simply and rationally about complex issues.

He can speak at all levels, has an outstanding reputation as being hardworking, smart, engaging and a big believer in the central role business plays in promoting national welfare.

What more could the BCA hope for?