As per a Reuters report, Cupertino-based Apple Inc. AAPL has suffered a big blow as Australian banking giants “agreed to accept payment made on mobile devices using Android pay”, while totally ignoring Apple Pay. Apple’s shares were trading down 1.77% yesterday.
It is believed that Apple and the Australian banks are still working out the terms of the deal. Reuters observes that Australia has a very big market for contactless payments and fees for processing such transactions are a big source of income for regional banks.
As per ANZ Bank, 60% of the total card transactions in Australia are contactless. NFC (near field communications) Technology is available on mostly all android based smartphones while Apple finally included the technology in iPhone 6. NFC can easily be attributed for the huge success of contactless payments in the country. In contrast, the contactless payments market in the U.S is still at a nascent stage due to the reluctance of merchants in accepting this form of transaction. However, mobile wallets, both in the U.S and Australia are yet to gain significant traction. In the U.S., mobile wallets comprise only 4% of the total card transactions as per a survey conducted by VeriFone and Wakefield Research in Jan 2015.
Analysts observe that given Australia’s big market for contactless payments, regional banks should have no problem in collaborating with Android and Apple Pay but at the same time point out that “there is little obvious reason to switch from plastic to mobile.”
In addition, Apple’s demand of 15 basis points in interchange fees has made the deal less palatable for Australian banks. Analysts call it a “clash of egos” between Apple and Australian banks. They add that a deal might be possible if Apple sweetens its offer i.e. if it asks for a smaller portion of interchange fees.
On the other hand, Android Pay has not demanded any such charges. As a result, the banks are happy collaborating with Android Pay. Banks like Westpac Banking Corp, ANZ Banking Group and Macquarie will start accepting Android Pay transactions once Alphabet Inc.’s GOOGL Google launches the service in 2016. Notably, banks like Westpac have their digital wallets but will also be supporting Android Pay as it has “multiple credentials from different banks.”
In October, Apple Pay forayed into Canada and Australia in partnership with American Express Co. AXP. It will allow users in these regions to secure their payments with iPhone, iPad or Apple Watch in stores where contactless payments and American Express cards are accepted.
In August, AmEx had struck a deal with Apple to integrate the Apple Pay services into its corporate card. While Apple Pay was already available to non-corporate AmEx card users, this deal brought corporate users under the umbrella of the service for the first time. Corporate cardholders were given access to in-app and in-store purchase payments, and this increased the number of Apple Pay users.
Further expansion is in the cards as the service will be made available in Singapore, Spain and Hong Kong from 2016.
At present, Apple carries a Zacks Rank #3 (Hold). A better-ranked stock in the broader tech space worth consideration is Facebook, Inc FB which has a Zacks Rank #2 (Buy).
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