Tech Talk by Mathew Dickerson

The current battle we are witnessing in the Australian consumer market is between Apple and a group of banks. 

CBA; Westpac; NAB and Bendigo and Adelaide Bank have put a joint submission to the Australian Competition and Consumer Commission (ACCC) to allow them to take on Apple. Although we think of these banks as large in our market (CBA; Westpac and NAB sit at numbers one, two and four on our ASX200) when we compare them to Apple, they are minnows. Apple’s current market capitalisation is two and a half times the combined market capitalisation of the banks involved in the ACCC action.

So what is this battle all about? Money. Obviously. More specifically, Apple Pay.

Apple Pay was launched in the US in September 2014 and since then has been steadily making its way across the world. In very simple terms, Apple Pay is a payment system that is designed to move consumers from physical wallets with plastic cards to a virtual wallet on a phone. Not just any phone but specifically an Apple iPhone. 

With Australia having a proud history of early adoption of technology, you would think consumers in Australia would be adopting this technology faster than Ryan Lochte could change his testimony.

Unfortunately, this decision is not one to be made solely by consumers. The banks have to play their part. They have to play nicely with Apple. Despite the fact that banks across the world have already come to terms with Apple Pay, our banks are holding out. This is not going to be an easy battle. Merchant fees in Australia amount to more than $2.8 billion but it is not just the absolute dollars that worries the banks. It is the loss of control over the transaction if Apple becomes involved. 

The banks should look to the lessons of the past in the music industry. Businesses that resist change and think that is the way to beat a competitor quickly find that customers will work out a way around roadblocks that are put in place. We are already seeing evidence of this in Australia.

Number three in the big four banks in Australia is the ANZ. They are a notable omission from the banks involved in the submission to the ACCC. They completed their individual deal with Apple on April 28 this year and that has seen a surge in applications. Online credit card applications for the ANZ have increased by twenty per cent since the announcement and traffic to their Web site has increased by six per cent. Consumers are loyal to a brand, to a point. The data is already showing us that if your bank doesn’t provide the service you want, you will find someone else who will.

So why is Apple even developing this technology? 

Note this quote from 2008 by Steve Jobs. “Phone differentiation used to be about radios and antennas and things like that. We think, going forward, the phone of the future will be differentiated by software.”

Apple don’t just want you to use their product. They want you so intertwined into the Apple ecosystem that you wouldn’t possibly consider another product. Once you use Apple Pay and iTunes and wear an Apple Watch and use iCloud then you wouldn’t possibly consider another phone. It is a great example of cross-marketing and keeping a customer within your product range. 

For the end-user, it is about convenience. Countless surveys show the primary motivator in a shopping experience is not price but convenience. If using a mobile phone to complete a purchase makes it easier for people to shop, I can guarantee people will use that system. 

I will be watching with interest the ACCC case but I suspect the remaining banks will not want to allow ANZ to get too much of a head-start and we will see agreements falling into place shortly.