EU heightens pressure on Apple Pay to open up

Apple acts as a gatekeeper to the technology that supports its mobile wallet and App Store, a position that rankles regulators, competitors and developers almost everywhere the company does business. 

The most recent pushback came on Monday, when the European Commission advanced its two-year-old antitrust investigation into Apple by formally accusing the company of "abusing its dominant position" by limiting access to the near field communication technology that supports contactless payments on devices that run iOS. 

The commission, which covers the European Union's 27 nations, is just one of several entities bringing lawsuits, regulations and legislative efforts to bear on Apple's walled garden, or the company's practice of dictating how others access its platform — and how much of a toll to charge for that access.

Notably, Apple has not let other companies access the NFC chip to enable contactless payments from their own mobile wallets. While Google's policies are often in line with Apple's, Google does allow third-party wallets such as Samsung Pay to operate on Android handsets.

Dursun Aydemir/Bloomberg

"We preliminarily found that Apple may have restricted competition, to the benefit of its own solution Apple Pay. If confirmed, such conduct would be illegal under our competition rules,” said Margrethe Vestagar, executive vice president in charge of the Commission's competition policy, in a statement on the Commission's site. 

The Commission is focused on what it says is Apple's decision to prevent mobile wallet app developers from accessing the necessary hardware and software on its devices to the benefit of Apple Pay and detriment of potential rival mobile wallets on Apple devices. By reserving iOS access to NFC on Apple Pay, there's an "exclusionary effect on competition, less innovation and less choice" on iPhones, said the Commission, adding that could be a violation of an EU treaty that prohibits the abuse of a dominant market position. 

The commission did not mention potential fines in its Monday statement, but under the Digital Markets Act, which passed in March, technology companies found to be acting illegally as gatekeepers can be fined up to 10% of their annual revenue in the EU.  Among operating systems, iOS controls about 30% of the European market, according to StatCounter. Apple leads Europe in smartphone sales, with a nearly 40% market share, according to Counterpoint Research. And mobile payments in Europe are growing quickly. Transaction volume for mobile point-of-sale payments in Europe is expected to increase from about $560 billion in 2022 to about $1.2 trillion by 2026, according to Statista. 

Consumers don't typically switch mobile operating systems, according to research the commission released early in its investigation, which the EU says is an impact of a lack of competition. 

“Mobile payments play a rapidly growing role in our digital economy. It is important for the integration of European Payments markets that consumers benefit from a competitive and innovative payments landscape," Vestager said in the commission's statement. 

There have been other political battles over accessing NFC technology via iOS devices. For example, Germany in 2019 passed a law requiring Apple to open the iPhone's NFC chip to other mobile wallets, though that law had a loophole that allows Apple to maintain restrictions for security reasons. And Australia's banks attempted to collectively bargain against Apple for Apple Pay fees, though Australian regulators ruled against the banks. 

Beyond the EU's NFC probe, Apple faces pressure over its payment practices in several jurisdictions, including other commission probes. The commission is also investigating Apple's requirement that streaming apps direct payors to Apple's internal payment system while limiting what third-party developers can say about other payment options. 

The dispute over routing developers to Apple's internal payment system over alternative payment rails is similar to a legal battle between Apple and Epic Games in the U.S., which followed Apple dumping Epic off of the App Store after violating Apple's payment policies. The decision in Epic Games case was mixed, with Apple being required to be more flexible in its payment policies. But Apple was not classified by the U.S. judge as a "monopoly," which was a victory for Apple.  

South Korea passed a law requiring large technology companies like Apple and Google to allow external payment options in app stores, and similar legislation has been introduced in several U.S. states and in the U.S. Senate. U.K. antitrust regulators are also investigating the App Store's terms of service under similar lines as other countries.  

The stakes for Apple are high, given it charges a transaction fee of 15% to 30% for payments processed in Apple's ecosystem. Any ruling that finds Apple to be a monopoly threatens those fees. Apple recently waived the 30% payment fees in Japan for certain types of streaming content, such as Netflix, following a settlement with Japanese regulators. The regulators and Epic contend Apple's payment policies are restrictive, while Apple has countered the fees are necessary to fund security.

The European Commission did not return a request for comment by deadline. "Apple Pay is only one of many options available to European consumers for making payments, and has ensured equal access to NFC while setting industry-leading standards for privacy and security," an Apple spokesperson said in an emailed statement. "We will continue to engage with the Commission to ensure European consumers have access to the payment option of their choice in a safe and secure environment.”