The EU on Thursday accepted Apple’s promise to open up its iPhone “tap to pay” payment system to rivals as a way to settle an antitrust case and avoid a potentially heavy fine.
The European Commission, the EU’s executive arm and main antitrust enforcer, said it approved the commitments Apple offered earlier this year and will make them legally binding.
Regulators had 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 mobile wallet providers and third-party payment service providers access to the contactless payments feature in its iOS operating system. After Apple changed its proposals after testing and feedback, the commission said those “final commitments” would address its competition concerns.
“Today’s commitments bring to an end our investigation into Apple Pay,” Margrethe Vestager, the commission’s executive vice-president for competition policy, said at a press conference in Brussels. “The commitments bring significant changes to the way Apple operates in Europe to the benefit of competitors and customers.”
Apple said in a prepared statement that it is “offering developers in the European Economic Area an option to enable NFC [near-field communication] contactless payments and contactless transactions” for uses such as car keys, corporate badges, hotel keys and concert tickets.
Competition watchdogs on both sides of the Atlantic have been investigating Apple’s payments technology. A sweeping Justice Department lawsuit filed in March accuses the company of engineering an illegal smartphone monopoly, including allegations that it restricts access to contactless payments for third-party digital wallets.
The EU deal promises more choices for Europeans. Vestager said iPhone users will be able to set up a default wallet of their choice while mobile wallet developers will be able to use important iPhone authentication features like Face ID.
The commission had accused the company of denying others access to Apple Pay, which it said 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 there would be huge financial incentives for companies to use their own wallets instead of letting Apple act as a middleman, resulting in savings that could flow to consumers. Apple charges banks 0.15% for each credit card transaction that goes through Apple Pay, according to the Justice Department lawsuit.
Apple must open its payments system in the 27 EU countries plus Iceland, Norway and Liechtenstein by July 25.
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“From this date, developers will be able to offer a mobile wallet on the iPhone with the same tap-and-go experience that until now has been reserved for Apple Pay,” Vestager said. The changes will remain in effect for a decade and will be monitored by a trustee.
Violations of EU competition law can result in fines worth up to 10% of a company’s annual global revenue, which in Apple’s case can amount to tens of billions of euros.
“The main advantage for the issuing bank of supporting an Apple Pay alternative via iPhone is the reduction in fees incurred, which can be significant,” said Philip Benton, a principal analyst at research and advisory firm Omdia. To encourage iPhone users to move away from Apple Pay to another mobile wallet, “the fee reduction must be partially passed on to the consumer” through benefits such as cash back or loyalty rewards, he said.
Banks and consumers can benefit in other ways as well.
If companies use their apps for tap-and-go payments, they would get “full visibility” of their customers’ transactions, said Ben Wood, principal analyst at CCS Insight. That data will allow them to “build brand loyalty and trust and deliver more personalized services, rewards and promotions directly to users,” he said.