Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Market Insanity

Apple Battles Banks in Australia

Apple Inc. (NASDAQ: AAPL) has effectively declared war on four of Australia’s biggest banks over .

Four major financial institutions Down Under; The Commonwealth Bank of Australia, National Australian Bank, Westpac and the Bendigo and Adelaide Bank are demanding that the iPhone be made compatible with their third-party pay apps as a requirement for accepting Apple Pay. Apple is refusing and has now branded the four a cartel.

Apple is resisting the demands for security reasons. In particular it fears allowing outsiders access to the NFC (Near Field Communication) antenna that allows Apple Pay to communicate with cash registers.

The banks appealed to the Australian Competition and Consumer Commission or ACCC; that country’s equivalent of the American Federal Trade Commission, to force Apple to give them access to its system, Mashable reported.

Apple Afraid Banks would Compromise Security

It is easy to see why Apple is so adamant about not allowing access to NFC. If its NFC data were widely revealed hackers might get their hands on it and crack iPhones or worse the NFC.


A major fear is that allowing banks access to Apple Pay would give hackers access to Apple’s token based payment security system. In that system, the payment information is stored on Apple’s servers and in the iCloud. A token system creates unique payments for added security.

The conflict in Australia is the direct opposite of the situation in the United States where banks and credit unions are accepting Apple Pay while big retailers are saying no to it. Another reason why Apple is taking this step is possibly to keep other payment systems that use optical QR code technology out.

In the United States some retailers including Walmart Stores (NYSE: WMT) have embraced QR code but not NFC. Walmart is refusing to accept Apple Pay and Alphabet’s (NASDAQ: GOOG) NFC based Android Pay.

The Australian banks want to create their own payment application which Apple calls a monopoly and a cartel. Ironically enough Apple is charging that the banks would limit competition with such a solution.

It looks as if Apple is going to have a much harder time rolling Apple Pay in some countries than was previously thought. If the banking industry in other countries starts resisting it, Apple Pay might never seriously expand beyond the United States and the United Kingdom.

Apple Pay and Dying Retailers

Recent news stories once again show Apple’s big problem with getting Apple Pay accepted. One of the biggest retailers accepting the solution is Macy’s (NYSE: M), which announced plans to close 100 of its 728 stores or almost one sevenths of its footprint on August 11, 2016, The New York Times reported.

Apple Pay is accepted at Macy’s but not at Amazon (NASDAQ: AMZN) which reported that its revenues increased by $7.22 billion during second quarter 2016, rising to $120.64 billion for the first time.

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This demonstrates Apple’s biggest predicament with Pay it is getting the app accepted at declining old economy brands. Yet the biggest retailers are successfully resisting it or worse ignoring the solution altogether.

Nor are there any major new retailers to be seen at Apple Pay’s website. Instead the brands coming to Apple Pay include another dying department store chain JCPenney (NYSE: JCP) and Big Lots (NYSE: BIG) a minor player in the discount store sector.

It looks as if Apple Pay is a niche solution that may never get widespread acceptance. Instead of a massive payment platform like Visa (NYSE: V), Apple Pay may end up as a niche player in payments similar to Discover (NYSE: DFS).

One has to wonder if Apple should simply leave payments and sell Apple Pay to a payments specialist like PayPal (NASDAQ: PYPL). It may need to, to get the product widely accepted.