is September and Apple is in the news. There is nothing unusual about that. The
Apple iPhone 4s was released on 14 October 2011 and every year after that,
Apple has chosen September as the month to announce their latest iPhone.
Consumers and mobile phone professionals the world over have come to rely on
this timing.

is not what I want to talk about today though.

want to talk about an ongoing technology battle we are currently witnessing in
the consumer market between Apple and some little battling underdogs here in
Australia. When you think of the big banks in Australia, underdog is not the
first term that pops into your mind but these banks are playing first-grade now
on the world stage – and the world is watching.

Westpac; NAB and Bendigo and Adelaide Bank have put a joint submission to the
Australian Competition and Consumer Commission (ACCC) to allow them to take on
Apple. Although we think of these banks as large in our market (CBA; Westpac
and NAB sit at numbers one, two and four on our ASX200) when we compare them to
Apple, they are minnows. Apple’s current market capitalisation is two and a
half times the combined market capitalisation of the banks involved in the ACCC

what is this battle all about? Money. Obviously. More specifically, Apple Pay.

Pay was launched in the US in September 2014 and since then has been steadily
making its way across the world. In very simple terms, Apple Pay is a payment
system that is designed to move consumers from physical wallets with plastic
cards to a virtual wallet on a phone. Not just any phone but specifically an
Apple iPhone. When you visit a retailer you tap your phone on the terminal
while holding your fingerprint on the fingerprint reader on your phone. As is
the Apple way, it is simple to use and just works. Although Apple won’t release
the total number of users across the world, we do know that globally a million
new users are joining the service each week and over the last year, transaction
volumes through Apple Pay have increased five-fold.

Australia having a proud history of early adoption of technology, you would
think consumers in Australia would be adopting this technology faster than Ryan
Lochte could change his testimony.

this decision is not one to be made solely by consumers. The banks have to play
their part. They have to play nicely with Apple. Despite the fact that banks
across the world have already come to terms with Apple Pay, our banks are
holding out. This is not going to be an easy battle. Merchant fees in Australia
amount to more than $2.8 billion but it is not just the absolute dollars that
worries the banks. It is the loss of control over the transaction if Apple
becomes involved.

banks should look to the lessons of the past in the music industry. Businesses
that resist change and think that is the way to beat a competitor quickly find
that customers will work out a way around roadblocks that are put in place. We
are already seeing evidence of this in Australia.

three in the big four banks in Australia is the ANZ. They are a notable
omission from the banks involved in the submission to the ACCC. They completed
their individual deal with Apple on 28 April this year and that has seen a
surge in applications. Online credit card applications for the ANZ have
increased by twenty per cent since the announcement and traffic to their Web
site has increased by six per cent. Consumers are loyal to a brand – to a
point. The data is already showing us that if your bank doesn’t provide the
service you want, you will find someone else who will.

why is Apple even developing this technology? The banks seem to do a pretty
good job of transferring our money electronically at the moment (and taking
their cut). Surely Apple should focus on making hardware and selling it and
working out better products that will appeal to the market and try and stop the
onslaught from myriad Android products.

this quote from 2008 by Steve Jobs. “Phone differentiation used to be about
radios and antennas and things like that. We think, going forward, the phone of
the future will be differentiated by software.”

don’t just want you to use their product. They want you so intertwined into the
Apple ecosystem that you wouldn’t possibly consider another product. Once you
use Apple Pay and iTunes and wear an Apple Watch and use iCloud then you
wouldn’t possibly consider another phone. It is a great example of
cross-marketing and keeping a customer within your product range.

the end-user, it is about convenience. Countless surveys show the primary
motivator in a shopping experience is not price but convenience. If using a
mobile phone to complete a purchase makes it easier for people to shop, I can
guarantee people will use that system.

will be watching with interest the ACCC case but I suspect the remaining banks
will not want to allow ANZ to get too much of a head-start and we will see
agreements falling into place shortly.


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