The Department of Justice is close to finishing an investigation into Apple that could soon result in an antitrust lawsuit, according to
A possible DOJ lawsuit would be wide-ranging, according to The New York Times and other media. It would include scrutiny of Apple's use of text bubbles to differentiate Android messages from iMessages, the direct integration between Apple Watch and iPhones and Apple's policies governing Apple Pay. Regarding payments, U.S. government investigators are reportedly looking at how the iPhone blocks outside parties such as banks from offering mobile payment apps for the iPhone.
The potential DOJ suit, European regulation and U.S. litigation threaten Apple's power to charge fees to access the company's technology to process payments. They would also erode Apple's ability to act as the enrollment party for offering financial services from partners. Apple Pay has built a substantial user base over the past decade — about 45 million in the U.S. and more than 500 million globally, according to
An accumulation of international political and legal pressure could provide a chance for rival payment providers, such as PayPal's Venmo, Block's Cash App or the new
"Apple makes money by selling iPhones and creating experiences for the iPhone," said Stewart Watterson, a senior analyst at Datos Insights. "If Apple is no longer allowed to make the experiences exclusive, that's very disruptive to its business model."
The DOJ and Apple did not provide comment for this article. Regulators and plaintiffs like Epic Games say Apple's control over payments and the resulting fees are unfair and harm competition. Apple and Google — which faced similar litigation from Epic Games — contend that their policies promote a smooth and secure payment experience.
Apple has a 54% share of the U.S. smartphone operating system market, according to
Apple Pay had about $1.9 billion in revenue in 2022, according to a report on the impact of large technology companies on the U.S. payments market from the
"Some of them could also gain access to the NFC chip for their own apps, enabling them to bypass Apple Wallet completely," McPherson said.
If Apple Pay is forced to enable more direct competition, Apple would remain a formidable competitor. The iPhone would still be Apple's home court with a decade head start on enrolling consumers to use Apple Pay, rather than the enrollments coming via a bank-supported mobile wallet.
"I could see issuing banks offering their own wallets, but they may lack the flexibility of a true multi-account and multi-institution wallet," Press said. "Ultimately, alternatives to Apple Pay would have to be distinctly better in terms of user experience, or offer some kind of financial advantage to users, in order to garner broad adoption."
In this way, the DOJ battle with Apple is not much different than Apple and Google's battle with Epic Games over app store payment processing. Even if the big tech firm that controls the app store has to open itself to outside payment providers, the providers still have to provide a superior checkout experience —
"It's one thing to allow something to exist in your operating system and another to have it be truly native to your operating system," Watterson said.
And all banks would probably not take advantage of Apple becoming more open, since smaller banks probably don't have the resources to develop their own wallets, and a proliferation of alternative wallets would hurt usability, McPherson said.
"As it is, the ability to choose a different card when using Tap to Pay with Apple Wallet is somewhat cumbersome, making that 'top of wallet' position very important," McPherson said. "Banks might want to pay something for the integration and convenience."
