A three-way turf war is currently being fought over the lucrative multi-billion dollar digital payments, and the buy-now-pay-later (BNPL) markets in Australia.
The battle pits Australia’s biggest banks, BNPL players, and giant fintech players, as they jostle for position and point fingers at each other.
The latest battle was being played out in Parliament, with Commonwealth Bank (ASX:CBA) CEO Matt Comyn accusing Apple of anti-competitive behaviour, and asking the government to regulate Apple’s fast-growing digital payments business in the country.
Appearing before a parliamentary inquiry, Comyn claimed that Apple deliberately programmed its NFC (near field communication) chips installed inside the iPhones such that they can only be used by Apple’s own digital wallets.
This, according to Comyn, means that bank apps can’t be used to make a tap-and-go payment directly, which severely limits what the apps can do.
“Without access to the NFC, it is not even possible to have a competing service,” Comyn told Parliament.
The competiton watchdog, ACCC, seems to back Comyn, saying “there are potential competition concerns there”, and said it would undertake a deep dive into the issue.
Comyn’s claims were also supported by the RBA head of payments Tony Richards, who told Parliament that banks were being disadvantaged by a larger player.
In Australia, Apple’s iPhones are currently being used in as many as 80% of all smartphone “tap and go” payments.
BNPLs vs Banks
Earlier in the week, it was the banks that had fingers pointed at them in Parliament.
Testifying at the same parliamentary inquiry, Zip (ASX:Z1P) co-founder Peter Gray accused the banks of forcing their customers to delete their BNPL accounts as a requirement to get a mortgage loan approved.
“I can confirm to the committee the No. 1 reason for customers closing their Zip account is, the bank has told them they need to, to proceed with the mortgage,” Gray told Parliament.
Speaking to The New Daily via email, an Afterpay spokesman confirmed that he was also seeing the same thing happen to Afterpay customers.
“Unfortunately, we have sometimes heard of banks or mortgage brokers telling customers to close their Afterpay accounts in order to get a home loan approved,” the spokesperson told The New Daily in an email.
In response to the accusation, Comyn said CBA does not do that to its own customers, and he has “not seen or heard anything like that in the industry”.
Fintech vs BNPLs
Nervous investors dumped ASX-listed BNPL stocks earlier this month, concerned that new competition from giants Paypal and Apple would erode market share.
Shares in Zip Co, Afterpay (ASX:APT), and Sezzle (ASX:SZL) all dived by 10% in one day, following news of Apple developing its own BNPL platform, and Paypal launching its “Pay in 4″ BNPL offering in Australia.
The foray of Paypal into Australia was especially concerning for the BNPL incumbents, due to its wide market reach and decision to ditch late fees.
Doing away with late fees will put pressure on Afterpay’s revenue model, which made $70 million last year on such fees.
The BNPL sector is facing several several near term obstacles, which include regulations and heavy competition, making customer acquisition more costly going forward.
This scenario may have already played out last week, when Zip’s stocks were dumped and fell 7% despite reporting a double digit record revenue growth for the quarter.