The European Commission has announced that it will accept Apple’s commitments to open its iPhone “tap and go” payment system to third parties, concluding a 2022 investigation and averting potential fines for Apple accused of violating competition laws by blocking competitors’ access.
Background of the Case
In 2022, the EU charged Apple for restricting access to its NFC (Near-Field Communication) technology for payments. Apple received a “Statement of Objections” for suspected anticompetitive behavior, violating Article 102 of the TFEU.
The root of the issue was Apple’s limitation on third-party developers accessing the NFC input, which was only available through Apple Pay on iOS devices.
Key Changes and Commitments
Apple has agreed to several commitments to address the EU’s competition concerns:
- NFC Access: Third-party wallet providers can now access the NFC input on iOS devices free of charge, without using Apple Pay or Apple Wallet.
- HCE Mode: Apple will enable NFC access in Host Card Emulation (HCE) mode, allowing secure storage of payment credentials and transactions.
- User Preferences: Users can set HCE payment apps as default for store payments and use features like Field Detect, Double-click, Touch ID, Face ID, and passcode authentication.
- Monitoring and Dispute Resolution: A mechanism will be established to independently review Apple’s decisions restricting access.
- Geographic Scope: These commitments apply to all third-party mobile app developers and iOS users in the European Economic Area (EEA), even when traveling outside the EEA.
Additional Amendments by Apple
- Following a market test between January 19 and February 19, 2024, Apple made further amendments:
- SoftPOS Compatibility: Payments with HCE apps can be initiated at industry-certified terminals, including merchant phones.
- NFC Functionality: HCE developers can combine payment functions with other NFC use cases.
- Licensing Requirements: Developers do not need a Payment Service Provider (PSP) license to access NFC.
- Pre-building Payment Apps: Developers can pre-build payment apps for third-party wallet providers.
- Standards Compliance: Apple will update the HCE architecture to comply with industry standards, even if not used by Apple Pay.
- User Setup: Developers can prompt users to set up their default payment app with minimal clicks.
- Confidentiality and Dispute Deadlines: Apple will protect confidential information and shorten dispute resolution deadlines.
Impact and Availability
Apple had risked a fine of up to 10% of its global annual turnover, which was $383 billion in the year to September 2023.
The commitments ensure that the standardized NFC technology used in contactless payments will be available to competitors on Apple devices throughout the EEA, including the EU, Iceland, Liechtenstein, and Norway.
Statements from the EU and Apple
EU competition chief Margrethe Vestager stated, “From now on, competitors will be able to effectively compete with Apple Pay for mobile payments with the iPhone in shops.”
Apple responded by highlighting that it is providing developers in the EEA with NFC contactless payment options for various uses like car keys, corporate badges, hotel keys, and concert tickets.
Implementation Deadline
Apple must implement these changes by July 25, 2024. This will allow developers to offer mobile wallets on the iPhone with the same “tap and go” experience previously reserved for Apple Pay.