Apple says Australian banks' demands would create security threat

Apple is not exactly thrilled by the Australian banking industry's attempts to undermine its rollout of Apple Pay.

In July, four major financial institutions applied to the Australian Competition and Consumer Commission (ACCC) to negotiate collectively with Apple regarding mobile payments.

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For the banks — Bendigo and Adelaide Bank, the Commonwealth Bank of Australia, National Australia Bank, and Westpac — the fight centred on the fact that Apple does not allow outside banking apps to use iPhone hardware in favour of its own Apple Pay service.

"Apple's refusal to provide third-party apps with any access to the [near-field communication] functionality of its devices sets it apart from other hardware manufacturers," it said in the application. It's the NFC antenna that allows a smartphone to communicate with a payment terminal.

Now the technology company has hit back at what it calls the banks' "innuendo" and "misstatements," arguing their demands would create a security threat. Its submission, signed by the local head of Apple Pay, Marj Demmer, urges the ACCC to reject the banks' application.

Apple claims opening up its NFC functionality to the banks would be risky.

"Our hardware, software and services are built in a deeply integrated manner so we can provide the highest possible security," it writes. 

Apple Pay keeps payments secure using a system of tokenisation. Instead of sharing your credit card information during a transaction, the app instead creates a unique token as a stand-in, which it shares with the point of sale.

Users also submit a payment using their fingerprint via Apple's Touch ID system. The fingerprint and the device's unique account number are stored on the iPhone separate from Apple's operating system, Apple Pay servers and iCloud. 

Apple has been approached by Mashable for further details about the nature of the security threat.

Calling the banks a "cartel," the company also suggests granting the banks' application would produce anticompetitive results for the Australian consumer.

As Apple notes, the banks in the application together account for 66 percent of Australian credit card balances and 70 percent of household deposits. 

"The request by the application banks would slow innovation and reduce choices by protecting members of the cartel from competition with each other," it says.

"Allowing the banks to form a cartel to collectively dictate terms to new business models and services would set a troubling precedent and delay the introduction of new, potentially disruptive technologies."

In the submission, Apple shares that negotiations began with Australian banks in late 2014. The contactless payments service launched in November with only American Express on board, followed by its only major banking partner, ANZ, in April.

Although the banks are not attempting to negotiate collectively over banking fees, it's been reported the banks also clashed with Apple regarding how banking fees would be shared.