The EU on Thursday accepted Apple’s pledge to open its “tap to pay” iPhone payment system to rivals as a way to resolve an antitrust case and head off a potentially hefty fine.
The European Commission, the EU’s executive arm and top antitrust enforcer, said it approved the commitments that Apple offered earlier this year and will make them legally binding.
Regulators had accused Apple in 2022 of abusing its dominant position by limiting access to its mobile payment technology.
Apple responded by proposing in January to allow third-party mobile wallet and payment service providers access to the contactless payment function in its iOS operating system. After Apple tweaked its proposals following testing and feedback, the commission said those “final commitments” would address its competition concerns.
“Today’s commitments end our Apple Pay investigation,” Margrethe Vestager, the commission’s executive vice-president for competition policy, told a press briefing in Brussels. “The commitments bring important changes to how Apple operates in Europe to the benefit of competitors and customers.”
Apple said in a prepared statement that it is “providing developers in the European Economic Area with an option to enable NFC [near-field communication] contactless payments and contactless transactions” for uses like car keys, corporate badges, hotel keys and concert tickets.
Competition watchdogs on both sides of the Atlantic have been investigating Apple’s payment tech. A sweeping justice department lawsuit filed in March accuses the company of engineering an illegal monopoly in smartphones, including charges that it limits access to contactless payment 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 developers will be able to use important iPhone verification functions like Face ID.
The commission had charged the company with denying others access to Apple Pay, which it said is the biggest NFC-based mobile wallet on the market. Mobile wallets rely on NFC, which uses a chip to wirelessly communicate with a merchant’s payment terminal.
Analysts said there would be big financial incentives for companies to use their own wallets rather than letting Apple act as the middleman, resulting in savings that could trickle down to consumers. Apple charges banks 0.15% for each credit card transaction that goes through Apple Pay, according to the justice department’s lawsuit.
Apple must open up its payment system in the EU’s 27 countries plus Iceland, Norway and Liechtenstein by 25 July.
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“As of this date, developers will be able to offer a mobile wallet on the iPhone with the same ‘tap-and-go’ experience that so far has been reserved for Apple Pay,” Vestager said. The changes will remain in force for a decade and will be monitored by a trustee.
Breaches of EU competition law can draw fines worth up to 10% of a company’s annual global revenue, which in Apple’s case could have amounted to tens of billions of euros.
“The main advantage to the issuer bank of supporting an alternative to Apple Pay via iPhone is the reduction in fees incurred, which can be substantial,” said Philip Benton, a principal analyst at research and advisory firm Omdia. To encourage iPhone users to switch away from Apple Pay to another mobile wallet, “the fee reduction needs to be partially passed onto the consumer” through benefits like cashback or loyalty rewards, he said.
Banks and consumers could also benefit in other ways.
If companies use their own apps for tap-and-go payments, they would get “full visibility” of their customers’ transactions, said Ben Wood, chief analyst at CCS Insight. That data would allow them to “build brand loyalty and trust and offer more personalised services, rewards and promotions directly to the user”, he said.