Now we tend to think of our big four banks as, well, big. CBA; Westpac; ANZ and the NAB sit at numbers one; three; five and six respectively on our ASX200 by market capitalisation.
And then there is Apple.
To give you some idea of size, their market capitalisation is currently 3.4 times the combined market cap of our big four banks combined. Or to put it another way, Apple alone is the equivalent size of the combined largest 56 companies on the Australian ASX200.
OK – we have established the size of Apple. But with that size comes power.
Way back in 2016, I wrote a column that discussed the ongoing technology battle in Australia between Apple and a group of our big banks. The battle all relates to Apple Pay. On 9 September 2014, Apple announced that they were launching Apple Pay. It gave users of certain models of Apple phones and watches the ability to use their Apple device to make a payment instead of using a contactless card. Contactless cards were relatively widespread by 2014 as they had started being used in 2008.
That all sounded wonderful but, of course, Apple wanted a little slice of the interchange fees (or merchant fees). In Australia, they add up to almost $3 billion annually.
The big four banks in Australia are accustomed to being able to flex their individual or collective muscles and get what they want. We have already established the relative size of Apple so when Apple knocked on Australia’s door in 2016, Apple dictated the terms. The banks didn’t like that so CBA; Westpac; NAB and Bendigo and Adelaide Bank put a joint submission to the Australian Competition and Consumer Commission (ACCC) to allow them to take on Apple as a group.
ANZ didn’t join the joint action. On 28 April 2016, they announced that ANZ users could start to use Apple Pay. Almost immediately, online credit card applications for ANZ increased by twenty per cent and traffic to their Web site increased by six per cent. Within four months, over a quarter of a million ANZ customers were using Apple Pay. It must have been killing the other big banks seeing them bleed customers to ANZ while they waited for a determination by the ACCC.
On 31 March 2017 the ACCC announced that they were denying the application by the four banks to collectively boycott and bargain with Apple Pay. “Damn!” said the banks. “Yay!” said Apple. “Who cares?” said consumers.” If we want to use Apple Pay, we will just apply for an ANZ card.”
As much as the other banks tried to hold out on Apple, surveys and feedback from customers kept mounting the pressure on them. The CBA was the first to give in. On 23 January this year, CBA customers could finally start using Apple Pay. The details are confidential, of course, but I can guarantee that the agreement would not have been as favourable as the ANZ deal. Westpac and the NAB continue to hold out on Apple but mounting pressure from customers and shareholders will see them finally come to the party.
Australians love to adopt new technology. Australian bank data shows that 74 per cent of all MasterCard in-store transactions are now contactless and that per capita, contactless payments in Australia are amongst the highest in the world. The evidence from ANZ shows that once the technology is available, people will adopt it. It won’t be a matter of if but when the rest of the banks join ANZ and CBA in offering Apple Pay to their customers.