Ever since Apple Pay debuted in 2014, Apple Inc. has kept the near-field communication chip in its devices off-limits to payment apps from other companies. But now legislation has appeared in Germany that may force the computing giant to grant access to that all-important chip, which allows Apple phones and other devices to link to point-of-sale devices.
Apple is protesting the move, which would become law next year if approved by the Bundesrat, the upper house of Germany’s parliament, according to a Reuters report. If that happens, it could cut development costs for banks participating in third-party mobile wallets and have wide implications for a variety of payments functions offered by Apple rivals, experts say.
A parliamentary committee in Germany this week voted in favor of an amendment to a money-laundering bill that would require “operators of electronic money infrastructure” to grant access to competitors for “a reasonable fee,” the Reuters report said. The amendment is seen as clearly aimed at Apple, though the company is not mentioned by name. And, while the legislation is limited to Germany, observers say it would be hard for Apple to maintain an open stance in one major market while restricting its NFC chip to Apple Pay in the rest of the world.
Apple has said the proposed legislation would hurt user friendliness and threaten data protection and the security of financial information, according to a statement the company gave to Reuters. Apple did not immediately respond to a request for comment from Digital Transactions News. The reference to data protection comes as Europe has recently used laws such as the General Data Protection Regulation to respond to widespread fears regarding how companies gather, manipulate, and store consumer information.
Forcing Apple to open access to the NFC chip would allow financial institutions to create payments apps for Apple devices independently of Apple Pay, which could cut development costs, observers say, since they could use the same code for both Apple and Android environments. “Apple has had a lock on the NFC chip, and that forces banks to develop on two platforms. That lock has greatly delayed innovation by banks on NFC in the payments market,” notes Tim Sloane, vice president for payment innovation at Mercator Advisory Group, Marlborough, Mass.
If the German effort succeeds, it will “create a level playing field,” Sloan argues, for all app developers and could potentially lead to faster development of new banking and payments applications. Other experts agree, and add that what happens in Germany, in this case, at least, isn’t likely to stay there. “The market would welcome open access to the Apple platform. If such access is allowed/enforced in Germany, it could easily spread to other countries,” says Ron van Wezel, an Amsterdam-based senior analyst at the consultancy Aite Group, in an email message. “I don’t see how Apple could restrict it to Germany.”
Apple Pay, which works on the iPhone, iPad, Apple Watch, and Mac, is supported by financial institutions in regions around the world, including Asia-Pacific, Europe, Latin America, the Middle East, and North America.