Apple Pay is hitting a wall with Australian banks
Apple Pay, Apple's first foray into mobile payments, was announced by the technology heavyweight in September last year, but its global roll out hasn't been all smooth sailing.
It ran into multiple problems on the London Tube after its UK introduction, while take up in the U.S. seems to be a little slow, and now the company is reportedly in a stand-off with the major Australian banks.
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Apple Pay enables contactless purchases via an iPhone or Apple Watch at supported merchants. It launched in the U.S. in October 2014 with support from credit card companies Visa, MasterCard and American Express, as well as in the UK in July 2015.
To work, however, the platform needs a deal with the bank that issued the credit card — and that's where Australia's big four banks are holding up progress, according to Fairfax Media.
The fight between Australia's big banks and Apple is reportedly concentrated mostly on fees. Australian banks earn around A$2 billion in interchange fees each year, which merchants pay in order to use the bank's payment infrastructure, and they're reportedly unwilling to give up a portion of the pool to Apple. Interchange fees in Australia are already lower than in America, and so allowing Apple to take a cut is a hit they're so far unwilling to take.
National Australia Bank is said to be closest to a deal with Apple, but a smaller bank is likely to jump in first in an effort to entice new customers.
Commonwealth Bank of Australia Chief Executive Ian Narev questioned the immediate need for Apple Pay in the Australian market, given that in his view, Australian banking is miles ahead of the U.S. in terms of technology and innovation.
"By most global standards, the capability that the Australian banking sector has generally, and Commonwealth Bank has specifically, to provide for customers is ahead of a lot of the other markets around the world where Apple has done well," he told Fairfax. "There is functionality associated with Apple Pay that we have had in the market for 18 months to two years."
Certainly, Australia's use of tap-and-go credit and debit cards, which allow customers to pay by holding their card over a contactless reader, are well in advance of what's on offer in the U.S. Some banks already have their own version of Apple Pay — the Commonwealth Bank and Westpac, for example, offer a "Tap & Pay" functionality through their apps on Android and Samsung smartphones, respectively.
Apple Pay is also coming up against competitors like Samsung Pay, which, unlike Apple's mobile payment platform, can also use a store's existing card magstripe readers to facilitate transactions on the smartphone.
Narev was certainly not putting all bets on Apple in the mobile payments race. "If it is not Apple, it might be Google; if it is not Google, it might be Samsung; if it is not Samsung, it might be Amazon; if it is not Amazon, it is going to be someone else," he added.