EU targets Apple Pay exclusive access to iPhone’s NFC chip

Since the release of the iPhone 6, all subsequent models of Apple’s smartphone have enabled contactless payments with the Apple Pay mobile wallet using near-field communication (nfc) technology.

And unlike Android phone users, iPhone users have no alternative options if they want to make NFC payments, as the terms of Apple’s developer agreement prohibit third parties from using the iPhone’s NFC chip in that way.

In an interview with PYMNTS, Claus Bunkenborgthe CEO of the Nordic mobile wallet operator MobilePayexpressed a view perhaps shared by his peers in the European mobile payment space:

“We would certainly like to use the NFC antenna to have even smoother payment […] We hope that the European Commission, one way or another, can get Apple to open up the infrastructure so we can use NFC. Until that happens, we are using QR codes. […] but if I could choose, I would prefer the NFC.

Watch the interview: Shared vision will give EU digital wallets a sharper competitive edge globally

The good news for MobilePay and other European mobile wallets is that two EU regulatory developments may force the changes Bunkenborg hopes for.

The first is an ongoing antitrust investigation that the European Commission (EC) opened into Apple Pay in 2020. In comments Commenting on the progress of the investigation in May, EU competition commissioner Margrethe Vestager made it clear that Apple’s stranglehold on iPhone NFC use falls short of EC fair play standards.

Accusing the firm of building a “closed ecosystem” around its devices and operating system, he said that “by excluding others from the game, Apple has unfairly protected its Apple Pay wallet from the competition. If proven, this behavior would amount to abuse of a dominant position, which is illegal under our rules.”

In his speech, Vestager also indicated that the EU Digital Markets Law (DMA), formally adopted by the European Parliament this month, will directly affect the EU digital payments market and that the EC’s Apple Pay probe will inform future applications of the regulation.

Read more: Apple faces EU antitrust charges over NFC chip practices

Vestager’s remarks are revealing, as Apple is one of the few companies likely to be designated “gatekeepers” under the DMA.

While companies won’t be notified that they have been designated gatekeepers until six months after the WFD goes into effect, the high thresholds the regulation sets in terms of revenue and user base mean that only the largest companies, such as Google, Meta, Amazon and Microsoft could qualify.

While many aspects of the DMA will affect Apple’s European business model, section 52 explicitly names NFC technology as one of the hardware components to which guardians have restricted access.

The passage concludes that gatekeepers should “be required to ensure equal access and interoperability with the same operating system, hardware, or software features that are available to or used in the gatekeeper’s provision of any ancillary services.” .

Related: Apple’s financial services ambitions may clash with the EU’s WFD

The DMA notes that preventing third-party access to specific technical features like NFC stifles innovation and limits consumer choice.

Similarly, Vesteger has stated that “the potential for innovation in this space is enormous. But this innovation has been prevented because Apple refuses to let others access NFC on their devices.”

Big Tech Forced to Adapt

With Apple’s share of the European smartphone market close to 40%, the global tech firm has no choice but to follow EU rules, as evidenced by comments made by the company’s senior vice president of worldwide marketing, Greg Joswiak, recently made the Wall Street Journal.

When asked if Apple would switch from its proprietary charging system to USBC in light of the EU common charger mandate, Joswiak went straight to the point. “Obviously we’ll have to comply, we don’t have a choice,” he said, suggesting that the standardized charging port will be a feature of future iPhone models.

As the USBC case demonstrates, when the EC does get its foot in the door on technical compatibility issues, the sheer size of the common market means that not playing ball would mean significant losses for the big tech companies affected.

Having turned its attention to the NFC chip in the iPhone, there is now a precedent for the CE to enforce technical standards.

For the future of mobile payments in the EU, the mainland’s mobile wallets may not be limited to QR code-initiated payments for long. In turn, the new possibilities for open banking could boost the EU’s ambition to reduce the influence of foreign players in the European payments landscape.

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Convenience drives some consumers to store their payment credentials with merchants, while security concerns stop other customers. For “How We Pay Digitally: Editing Stored Credentials,” a collaboration with Amazon Web Services, PYMNTS surveyed 2,102 US consumers to explore the consumer dilemma and reveal how merchants can beat holdouts.

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