EU accepts Apple’s pledge to give rivals access to iPhone’s ‘tap to pay’ technology to resolve antitrust case

KELVIN CHAN, Associated Press

3 hours ago

FILE – An Apple logo is illuminated at a store in central Munich, Germany, December 16, 2020. The European Union says it accepts Apple’s pledge to give rivals access to its tap-and-go mobile payment system as a way to resolve an antitrust case and avoid a hefty fine. (AP Photo/Matthias Schrader, File)

LONDON (AP) — The European Union on Thursday accepted Apple’s pledge to make its tap-to-pay payment system on iPhones available to rivals, a move it said would help resolve an antitrust case and avoid a potentially hefty fine.

The European Commission, the EU’s executive arm and chief antitrust enforcer, said on Wednesday it had approved the commitments offered by Apple earlier this year and would make them legally binding.

In 2022, regulators accused Apple of abusing its dominant position by restricting access to its mobile payments technology.

Apple responded by proposing in January to allow third-party mobile wallet and payment service providers to access contactless payment features on its iOS operating system. After Apple modified its proposals following testing and feedback, the commission said those “final commitments” would address its competition concerns.

“Today’s commitments conclude our investigation into Apple Pay,” Margrethe Vestager, executive vice-president for competition policy at the Commission, told a press conference in Brussels. “These commitments introduce important changes to the way Apple operates in Europe, to the benefit of competitors and customers.”

Antitrust regulators on both sides of the Atlantic are investigating Apple’s payments technology. A sweeping Justice Department lawsuit filed in March accuses the company of creating an illegal smartphone monopoly, including limiting access to contactless payments for third-party digital wallets.

The EU deal promises more choice for Europeans. Vestager said iPhone users will be able to set a default wallet of their choice, while mobile wallet makers will be able to use important iPhone verification features like Face ID.

Mobile wallets operate on the basis of near-field communication technology, or NFC, which uses an integrated circuit to wirelessly communicate with the merchant’s payment terminal.

The commission accused the company of preventing others from accessing Apple Pay, which is the largest NFC-based mobile wallet on the market.

Analysts said companies would have big financial incentives to use their own wallets rather than let Apple act as a middleman, leading to savings that could be passed on to consumers. Apple charges banks 0.15% for every credit card transaction that goes through Apple Pay, according to the Justice Department lawsuit.

“The main advantage for an issuing bank to support an alternative to Apple Pay via iPhone is the reduction in fees, which can be significant,” said Philip Benton, principal analyst at research and advisory firm Omdia. To encourage iPhone users to switch from Apple Pay to another mobile wallet, “some of the fee reduction needs to be passed on to the consumer” through benefits such as cashback or loyalty rewards, he said.

Banks and consumers could benefit in other ways as well.

If companies use their own apps for tap-and-go payments, they will gain “full visibility” into their customers’ transactions, said Ben Wood, principal analyst at CCS Insight. This data will allow them to “build brand loyalty and trust and offer more personalized services, rewards and promotions directly to the user,” he said.

By July 25, Apple must make its payments system available in all 27 EU countries, as well as Iceland, Norway and Liechtenstein.

“From that date, software developers will be able to offer a mobile wallet on the iPhone with the same tap-and-go functionality that has so far been reserved for Apple Pay,” Vestager said.

The changes will be valid for ten years and will be monitored by a trustee.

Apple said in a prepared statement that it is “providing developers in the European Economic Area with the ability to enable NFC contactless payments and contactless transactions” for applications such as car keys, corporate IDs, hotel keys and concert tickets.

Violating EU competition law can result in financial penalties of up to 10% of a company’s annual global revenue, which in Apple’s case could amount to tens of billions of euros (dollars).