Regulatory pressure continues to ramp up on big tech firms like Apple, and a new lawsuit takes aim at one of the iPhone maker’s lesser-known cash cows. According to an antitrust lawsuit filed by Affinity Credit Union, Apple has abused its market position with Apple Pay to keep other companies out, earning fees on every tap-and-pay iPhone transaction.
Apple’s mobile payment system uses near field communication (NFC), which is the same technology Google uses on Android. However, it probably won’t come as a surprise that Apple’s version is much more locked down. On Android, you can register different contactless payment providers in the settings. For example, Samsung’s phones default to Samsung Pay, but it only takes a few taps to switch it to Google Pay. Apple only lets you use Apple Pay, and it charges fees to card issuers, which others generally don’t.
According to Bloomberg, Apple charges a 0.15 percent transaction fee on all credit card transactions and a 0.5 percent fee for debit. Google Pay and Samsung Pay don’t charge any fees to card issuers. Affinity alleges in the lawsuit that Apple’s payment fees have resulted in a continuous stream of revenue, amounting to $1 billion in 2019 alone.
Affinity says Apple could not sustain these fees if it allowed other payment services access to the iPhone’s NFC feature. Instead, it ties the mobile device and mobile wallet together while excluding all competition. That arguably makes it a violation of the Sherman Antitrust Act. Whether or not the courts see it that way is an open question, and Apple has a veritable army of lawyers who will no doubt devise cunning arguments that support its perspective.
This credit union is not alone in objecting to the way Apple handles NFC payments. Earlier this year, the EU issued a preliminary finding that Apple Pay is anticompetitive. Apple told the EU, as it probably will in this case, that it locks down NFC for security reasons. The EU, however, found that Apple’s behavior cannot be justified by security concerns.
Apple has been making changes to some of its long-standing policies as legal challenges ramp up. For example, it no longer charges most app developers the full 30 percent fee for sales on Apple’s platform. Perhaps it will drop the Apple Pay fees or at least take a smaller cut going forward.