If you thought that Apples new pay feature was coming to a device near you in Australia then think again. As Apple makes an attempt in key western markets to take a share of the online payment and app transaction fees in Australia all is not going to plan with some observers now suggesting that the nation’s largest banks won’t have a bar of it. For reference global ecommerce figures were estimated to have topped $1.2 trillion in 2014 with Statista estimating that $388.75 billion (USD) would have been the value of the market in Asia Pacific alone (slightly less than North America on $419.53b).
That means that based on those figures and market data for Australia Apple would be looking for a share of some $2 billion. The Apple Pay feature was launched in 2014 in the United States and has only just reached the UK in the last month. The feature came as a release with the Apple iPhone 6 and latterly the Apple Watch which uses tap and go functionality to pay for items. The technology uses fingerprint recognition. The challenge for Apple is many of the countries already have tap and go technology through Apps than can be readily downloaded specific to a customer’s banking provider. In addition merchant service providers have already rolled out new terminals to tens of thousands of small business and large corporate providers where a customer is able to tap a card on the terminal for transactions worth less than $100.
Some observers are suggesting that what Apple is attempting to sell is somehow a market innovation but many senior banking executives familiar with the global IT beasts penetration strategy are saying its not new at all. Commonwealth Bank of Australia CEO Ian Narev has said that "There is functionality associated with Apple Pay that we have had in the market for 18 months to two years."
The retiscence of Australia’s big banks comes off the back of a large investment they are making into the new payments platform and the observation that Apple is a “Johnny come lately” that will not have to make the same investment but could end up benefitting off the new platform – and pay nothing to do so.
Apples move into the market comes at a time when there is still a lot of public debate around the use of credit cards by consumers and the transaction fees that are heaped on both the consumer and business. As more consumers head to online payment gateways to buy everything from airline tickets to clothes the amount of surcharges is coming into question. In 2013 a survey by Choice indicated that Airlines were add surcharges ranging from 4.2% to 17% and there have been calls by politicians to try and force banks to pass on interest rate savings when it comes to cards. For example, just because the Reserve Bank may have lowered interest rates to record low levels over the last 12 months doesn’t mean to say that interest charged on credit cards is reducing. The choice report, focussing on airline booking surcharges found that:
Qantas $7.70 per person per booking, or a total of $30.80, for a domestic flight from Bundaberg to Brisbane return. Fare without surcharge: $712; fare with surcharge: $742.80.
Virgin Australia $7.70 per person per booking, or a total of $30.80, for a domestic flight from Brisbane to Mackay return. Fare without surcharge: $392; fare with surcharge: $422.80.
Jetstar $25 per person, or a total of $100, for an international flight from Brisbane to Denpasar return. Fare without surcharge: $2362.80; fare with surcharge: $2462.80.
Tigerair $8.50 per person per flight, or a total of $68, for a domestic flight from Brisbane to Sydney return. Fare without surcharge: $399.60; fare with surcharge: $467.60.
Property sector guru, Michael Yardney, wrote recently that “Australian credit card holders have paid an extra $2.11 billion in interest charges since November 2011 because many banks have not passed on the Reserve Bank’s cash rate cuts to cardholders” and percent since November 2011 when the Reserve Bank began cutting the cash rate this cycle, according to the creditcardfinder.com.au database. The 10 cash rate cuts since November 2011 were tracked. It was found that if credit card providers passed on the Reserve Bank’s full 2.25 percentage point cuts, the average credit card purchase rate would now be 14.25 percent. Furthermore, it’s been revealed that credit card holders would have paid $2.11 billion less in interest over that period."
Whatever happens Apple isn’t the first or last to try and access a market dominated by Australia’s big banks. The question remains one of consumption and demand. There is no doubt that consumer demand for more online transactions is on the up but so too is their desire to be treated fairly when it comes to transactions fees. While the major banks may own the market they may need to consider that a global giant like Apple could come in and undercut them to build volume demand of their service. Whatever happens there is a still a way to go yet.
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