The EU on Thursday accepted Apple’s commitment to open up its “tap-to-pay” iPhone payment system to competitors as a way to resolve an antitrust case and avoid a potentially hefty fine.
The European Commission, the EU’s executive and top antitrust body, said it approved the commitments Apple offered earlier this year and will make them legally binding.
Regulators accused Apple in 2022 of abusing its dominant position by restricting 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 payments feature of its iOS operating system. After Apple revised its proposals following testing and feedback, the commission said these “final commitments” would address its competition concerns.
“Today’s commitments conclude our investigation into Apple Pay,” Margrethe Vestager, the commission’s executive vice-president for competition policy, told a press conference 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 “provides developers in the European Economic Area with the ability to enable NFC [near-field communication] contactless payments and contactless transactions’ for use as car keys, company badges, hotel keys and concert tickets.
Competition watchdogs on both sides of the Atlantic are investigating Apple’s payments technology. A sweeping Justice Department lawsuit filed in March accuses the company of creating an illegal smartphone monopoly, including allegations that it restricts access to contactless payments for third-party digital wallets.
The EU agreement promises Europeans more choice. Vestager said iPhone users will be able to set the default wallet of their choice, while mobile wallet developers will be able to use important iPhone authentication features like Face ID.
The commission accused the company of denying access to Apple Pay, which it says is the largest NFC-based mobile wallet on the market. Mobile wallets rely on NFC, which uses a chip to communicate wirelessly with a merchant’s payment terminal.
Analysts said companies would have big financial incentives to use their own wallets rather than let Apple act as a middleman, leading to savings that could trickle down to consumers. According to the Justice Department’s lawsuit, Apple charges banks 0.15% for each credit card transaction that goes through Apple Pay.
Apple must open its payment system in 27 EU countries plus Iceland, Norway and Liechtenstein by July 25.
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“From this date forward, developers will be able to offer Mobile Wallet for iPhone with the same tap-and-go experience previously reserved for Apple Pay,” Vestager said. The changes will remain in effect for a period of ten years and will be supervised by the administrator.
Violations of EU competition law can lead to fines of up to 10% of a company’s annual global revenue, which in Apple’s case could amount to tens of billions of euros.
“The main benefit for an issuing bank in supporting an alternative to Apple Pay via iPhone is the reduction in fees incurred, which can be significant,” said Philip Benton, principal analyst at research and consultancy Omdia. For iPhone users to switch from Apple Pay to another mobile wallet, “the fee reduction has to be partially passed on to the consumer” through benefits such as cashback or loyalty rewards, he said.
Banks and consumers could also benefit in other ways.
If companies use their own tap payment apps, they get “full visibility” into their customers’ transactions, said Ben Wood, principal analyst at CCS Insight. That data would allow them to “build brand loyalty and trust and offer more personalized services, rewards and promotions directly to users,” he said.