Putting Consumers in Control – why Open Access Matters

Today The Australian published an excerpt of an Opinion Piece I wrote on the topic of Open Access. You can see the analysis that Richard Gluyas wrote on it here:

FinTechs want open access for all

Below is the Opinion Piece I wrote, in full (you can also read the excerpt on The Australian). We’ll be discussing plenty about Open Access – in Payments, Financial Data and Open Bank APIs – at our Collab/Collide Summit in Melbourne next week. Make sure you get your tickets, as it will be a great discussion.


Putting Consumers in Control – why Open Access Matters
The ongoing saga of Apple vs the Banks is an important debate for Australia to have. But given the approach of the Bank consortium to include the issue of whether they can pass on Apple’s fee in their collective negotiation, it’s easy to be distracted from the real and very important issue that’s actually at stake.

The issue here is one of restricted access, or put another way, of reducing the amount of control a consumer has over paying for things using one of the most important and prevalent tools in their lives – their mobile phones.

The Near-Field Communications (NFC) chip is hardware and functionality built into the iPhone, much like the phone’s camera, WiFi or Bluetooth antennas. It enables consumers to interface and connect their device with other things.

Apple Pay, however, is separate – it’s proprietary software that Apple has built, that also happens to leverage the iPhone’s NFC chip to facilitate and execute the transaction.

Apple has every right to recoup the cost of building Apple Pay – just as banks recoup the cost of providing payments infrastructure in the form of merchant fees, which some merchants in turn pass on to consumers in the form of card surcharges. These surcharges are regulated by the RBA so merchants and banks can’t profit by over-charging consumers for access (which some have in fact done in the past).

Apple also has every right to recoup the cost of building and integrating NFC chips, along with other hardware components like the camera and Bluetooth – and that’s exactly what they do every time the consumer spends hundreds of dollars to buy their shiny iPhone.

The crux of the issue is that Apple doesn’t allow others to access the iPhone’s NFC chip. So if a bank or FinTech company wants to leverage NFC for their own versions of Apple Pay so consumers can have other options to pay using their iPhone – and many do want to do this – Apple won’t let them.

Apple is forcing consumers to use their Apple Pay software if they wish to pay with their iPhone, and are restricting consumers’ ability to use other companies’ payment software with NFC (known as “third party wallets”).

Put another way, it’s like Apple saying you could only view and share your iPhone Camera photos on Apple software like iMessenger, and blocking you from being able to post them to Facebook, WhatsApp or WeChat. Consumers worldwide would have a hard time accepting that. Why, then, should we put up with Apple blocking us from being able to use our iPhones to pay with other companies’ payment software?

This ultimately reduces innovation and competition, and enables Apple to charge banks and FinTechs a substantial fee to use the iPhone for payments – which ultimately gets passed onto consumers and merchants. It’s also what’s slowing consumers from migrating off much less secure tap-and-go card payments, and slowing adoption of the much safer method of paying with your iPhone, where payments can be verified using your thumbprint or a pin-code.

This is why FinTech Australia doesn’t support the banks’ approach. Asking the ACCC to allow them to collectively negotiate with Apple to pass on or even bring down the cost of integrating with Apple Pay is only dealing with one symptom of the actual problem. The negotiation should be focused solely on giving others access to the NFC chip to create third party wallets. A collective negotiation also only benefits those in the negotiation bloc – the card issuers – rather than fixing the problem for all third party wallet services.

But this concept of restricted access isn’t just particular to Apple. In Australia, consumers are facing exactly the same problem of restricted choice when it comes to their ability to use new products and services that help them transact and manage their finances better.

Some of the same banks that are arguing so hard for Apple to give them access to the NFC chip are at the same time advocating for restricting competitors and innovative FinTech companies from being able to access customer data, even if the customer is the one asking for the data to be given to the FinTech in the first place. They are resisting our call to provide access to customer data via secure Open Banking APIs, which was recently mandated by the government in the UK.

In both cases, security and privacy concerns are being touted as the reason for restricting access. In both cases, this argument is questionable. No doubt security is critical for banks, as it is for FinTechs, who are regulated by the same regulators and have to hold dispute resolution schemes and insurances, just like the banks do.

The risk is that the banks could use the security argument to pick and choose which FinTechs the customer can share their data with. They would then be able to stop customers sharing data with the bank’s competitors as they please – and that’s an issue. Instead, the banks should work together with data aggregators like Yodlee and Proviso, and with the FinTech community to improve the security around how bank customers can access their data.

This is why FinTech Australia is advocating that government implement a principles-based regulatory framework that doesn’t allow companies to restrict access to economically important infrastructure – whether it be NFC chips in iPhones, Customer data stored in banks, the new National Payments infrastructure or otherwise.

Open Access does not equate to open slather, unregulated and insecure misuse of consumer information. Open Access is about removing company-imposed, self-interested restrictions and putting Consumers in control, to have the freedom to pay how they want, to transact how they want, and to instruct institutions to share their data with whom they want.

This issue will be debated at Collab/Collide 2016, FinTech Australia’s inaugural summit in partnership with LaunchVic in Melbourne on November 3. To find out more, visit http://www.fintechaustralia.org.au/