With Apple expanding its Apple Pay footprint, launching the mobile payments service in the UK, Australia is likely high on the tech giant’s target country list, however there are still hurdles to overcome ahead of a local launch, according to analyst firm Ovum.Ovum financial services technology analyst Gilles Ubaghs has commented that the relatively high penetration of Apple devices in the Australian market, combined with a very high contactless infrastructure base already in-store and widely used by customers, likely puts Australia high on the target country list.
However, while Apple is likely keen to launch now, Ubaghs has noted that Australian players are less sure, noting that there are a few key drivers – number one being Apple Pay’s payment model, with Apple collecting 0.15 per cent of every credit card transaction.
“They reached this agreement with participating banks in the UK and US, but the challenge is interchange rates (the fee collected on every transaction) is already much lower here due to regulatory drivers (closer to 0.33 per cent), and the banks cannot, and will not be able to, hand over such a big chunk of what is already a low-margin business,” Ubaghs commented.
Ubaghs added that an aspect “currently shaking up the market” is that there appears to be “a battle going on in the background between Apple and Visa”, with Ovum’s assumption being that a lot of Australian banks are waiting to see how it pans out.
While Visa tokenisation is a key feature of Apple Pay, Visa has also launched a new framework called the Visa Digital Enablement Program (VDEP), Ubaghs stated, acting as a means of any Visa bank connecting to any participating wallet platform, without the need for individual agreements between each bank and wallet.
“The big catch is the business conditions associated with VDEP mandate no pass through fees on transactions, meaning no wallet can collect revenue per transaction,” he commented. “Android Pay is the first major wallet to sign up to VDEP.
“Apple is understandably unhappy as they had an agreement with Visa to use their tokenisation technology, and now Visa is turning around and asking Apple to sign up to their business terms, sinking Apple Pay’s revenue model.”
Ubaghs noted that with no per transaction fees involved, “at this rate Android Pay could possibly hit Australia before Apple Pay”.
Ubaghs added that Ovum has spoken to retailers who are sceptical given that Australia already has extremely convenient contactless cards.
“Apple Pay as it stands now actually takes potentially longer with minimal clear benefit, and without a stronger incentive to using it (ie loyalty) there is little real point,” he commented.
“The key issue here is what Coles and Woolworths do, and they are the ones to watch in terms of opening up acceptance. Apple could get away with some but not all of the banks in launching Apple Pay, but they will definitely need both of the big supermarkets.”