What’s in Apple’s Wallet?

The answer to that question depends on a number of factors, some of them a bit complicated. In this issue’s cover story (see page 18), we come at the question guided by the thought that the Cupertino Colossus has certainly had some interesting approaches to the theory and practice of payments.

And outside parties, including law courts and government regulators, have kept a watchful eye on Apple’s various forays into the payments business. One recurring theme is its tight control over the ability of apps to refer payments processing to outside platforms. That bypass, which Apple litigated several years ago with Epic Games, is triggered at least in part by the company’s transaction fee, which can range as high as 30%.

Now comes the European Commission, which planned this month to announce a fine of about 539 million euros ($500 million) on Apple after investigating a complaint from Sweden-based music app maker Spotify Technology SA. The complaint was familiar: Apple’s policy of restricting apps from linking out to their own sites for services such as payments.

The regulator’s action, if it turns out to be as reported last month by The Financial Times, represents a substantial reduction from penalties the regulator sought in a notice it posted a year ago as it pursued its investigation.

The Commission, which operates as Europe’s antitrust regulator, had already won an agreement from Apple to allow outside entities, including payments processors like PayPal, to access technology in the iPhone such as the near-field communication chip, an element over which Apple has exercised tight control. The Commission’s new rules in that case were expected to emerge this month.

Now the penalty levied on Apple in the Spotify case comes as the tech company and its so-called walled-garden approach to the way it manages apps have become increasingly intertwined with payments. Significant revenue in app transactions can be at stake, given that standard fee for processing payments. In the wake of the Epic Games decision, Apple in the U.S. has reportedly levied a 27% fee on apps that stick with Apple for processing.

At least some observers of Apple and its payments policies argue disputes between developers and Apple would be best resolved out of regulators’ hands. “I certainly do not sympathize with the EU, it’s almost a malign force,” Eric Grover, a payments consultant, told us in referring to the Commission’s earlier case against Apple. “But the heroes and villains aren’t clear here.” At bottom, he argues, developers simply “are interested in selling more apps.”

So is Apple a payments company? Regulators and law courts certainly seem to think so.

—John Stewart, Editor john@digitaltransactions.net