Apple's EU concessions create payments opportunity for Samsung, Curve

Bloomberg

The European Commission has accepted an offer from Apple to open its payments technology to outside firms. That ends the threat of multibillion-dollar fines, but it also creates an opening for banks and rival mobile payment wallets. 

Samsung and Curve are taking a shot. Samsung Next, the South Korean technology company's venture capital arm, at the end of June made an investment in Curve, a London-based digital payment company that sells a single payment card that can store other cards. 

The investment, of undisclosed value, comes as Curve finishes work on a mobile payment app that will be available on iOS in the European Union by the end of this year and potentially in other markets such as the U.K. and U.S. Both Curve and Samsung sniff an opportunity as Apple faces challenges to open its technology to outside parties. In addition to the EU settlement, the U.S. Department of Justice is also investigating Apple's payment policies 

"Until this point, iOS users have been exposed only to Apple Pay for digital payments, a severe restriction in choice and to the detriment of consumers," said Jonathan Gugenheim, chief of staff for Curve, adding that the Curve Pay app will enable anyone with an iPhone to combine cards through Curve's all-in-one service. "We're hopeful that regulators in the U.K. and U.S. will follow Europe's lead and help ensure there is a fair and competitive market for mobile payments on iOS devices just like there already is on Samsung, Google, and other mobile phone manufacturers' ecosystems." 

A new wallet

Curve's Apple Pay alternative will replace an earlier user experience in which consumers had to add their Curve card to Apple Wallet Pay and complete the transaction through Apple Pay. 

"This is unnecessary friction and the new, slicker experience made possible by Apple's concession to the European Commission will make paying even easier for consumers," Gugenheim said. 

The introduction of Curve Pay will also save banks funds that are currently diverted to Apple in transaction fees, Gugenheim said. "That's a cost banks have been reluctantly incurring since the inauguration of Apple Pay," he said. 

Samsung and Curve have an existing partnership. In the U.K., Samsung Pay uses Curve's technology to offer users more payment flexibility. By integrating Curve's "all in one card'" technology, Samsung Pay enables users to consolidate multiple payment cards into a single digital card within the Samsung Pay app and give customers ubiquitous acceptance, according to Carlos Castellanos, an investor at Samsung Next. 

Additionally, Curve's "back in time" feature, which enables users to retroactively switch the payment card used for a transaction, benefits by offering no foreign exchange fees, Castellanos said.  

Curve's mobile wallet will feature Samsung Pay and other options. "The Samsung Next investment will help Curve to better understand the nuances of global wallet expansion and potentially make the mobile app and 'wearable tech' more seamless and user-friendly," Gugenheim said. 

Under pressure

Apple is slowly expanding access to its ecosystem in response to regulatory actions. The European Commission in late June said the App Store's payment policy is potentially violating competition rules, threatening to fine Apple 10% of its global revenue, or about $40 billion, a threat that the EU has waived. The EC also accused Apple of hindering access to the Near Field Communication technology on iPhones, potentially giving Apple Pay an unfair advantage. 

Apple threatened to not release new artificial intelligence products in Europe due to the regulatory move, though it did tell local media that it hoped to find a solution that would allow the release of the new technology. 

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Apple and Google have faced similar regulatory pressure and lawsuits globally involving their app store payment fees for third-party developers, which have been as high as 30%. Apple did not provide comment for this story by deadline, though it has lowered some App Store fees and extended access to its NFC technology for mobile payments in early 2024. Apple also faces a lawsuit over its payment policies in the U.K. In the U.S., the Department of Justice is investigating Apple over company policies that govern access to Apple technology, raising similar anti-competition concerns as the EC has raised. The pressure on Apple could provide an opportunity for other mobile wallets, such as the U.S. bank-led Paze Wallet. 

"Regulators and lawsuits on both sides of the Atlantic are prying open Apple's closed ecosystem," said Eric Grover, a principal at Intrepid Ventures. "Still, Apple will resist and will still have considerable influence."

A big market

Beyond regulatory moves against Apple, there's also a growing international market for digital wallets, which in 2023 made up 50% of global e-commerce spending, or about $1.6 trillion of a $3.2 trillion market, according to Worldpay's Global Payments Report for 2024. Digital wallets also make up about 30% of all global point-of-sale volume, or $3.2 trillion out of a $10.8 trillion total, according to Worldpay. Mobile wallets are on pace to reach $12 trillion of a total $25 trillion e-commerce and point of sale market by 2027, Worldpay reports. 

In the U.S., mobile wallet spending increased from 0.6% of all card spending in 2019 to 6% in 2023 and more than 7% in the first two months of 2024, according to research from Fiserv. And while the average payment size for mobile wallets fell from $40 in 2021 to $33 for the first two months of 2024, Fiserv attributed that to an expansion of mobile wallet usage into different payment types. 

And among banks, 51% of executives say at least 60% of their initiatives in 2024 will have a mobile-first approach, according to research from Arizent, American Banker's publisher. 

Challenger digital wallets and payment processors both have opportunities to rival Apple in the App Store and on the iOS platform, according to Grover.

"There's only room for a handful of big general-purpose digital wallets," Grover said. "The stakes are big."

The EU's pressure on Apple and Google opens up potential for other wallets, but both Apple Pay and Google Wallet already allow consumers to pick from a variety of loaded funding sources, and Apple Pay is expanding to include Affirm and other BNPL providers, including conventional credit cards, said Aaron McPherson, principal at AFM Consulting.

"Curve does have additional features that could make it attractive, such as rules on which funding source to use with which merchant, or automatically selecting an alternate funding source in case of a decline or appearing as a debit card for bill payments," McPherson said. "Apple or Google could add these features in the future, however."