EU Ends Apple Pay Probe, to Open Contactless Payments

The European Union has approved Apple’s commitments on Apple Pay to resolve a prolonged competition probe, announced by Commission EVP Margrethe Vestager in a Thursday press conference

“Apple has until July 25 to implement changes that will enable developers of rival mobile wallets to offer contactless payment using the predominant technology used in the EU (NFC), allowing them to offer their users “tap and go” payments,” she added.

In addition, they will be able to utilize critical iOS features, including Face ID, Touch ID, and passcodes for authentication and double-clicking to activate their applications.

Apple will also allow users to designate a third-party wallet application as their default instead of its own Apple Wallet.

In June 2020, the bloc’s competition division formally investigated Apple Pay, Apple’s mobile payment and mobile wallet technology, in response to numerous complaints.

The investigation was initially intended to examine Apple Pay in its entirety. Subsequently, the case focused on utilizing Apple’s technology for contactless payments.

Two years later, in May 2022, the EU reported preliminary findings that Apple had abused its dominant position to prevent competitors from providing NFC-enabled contactless payments on the iPhone.

This prevented them from developing rival mobile wallets and competing equitably with Apple Pay.

The EU specifically objected to Apple’s restriction of rivals’ capacity to develop wallet applications that can wirelessly communicate with NFC payment terminals, as Apple Pay is capable of doing.

It suspected that the restriction was intended to unfairly allow Apple’s contactless payment technology to acquire market share.

Additionally, the European Union expressed its desire for Apple to grant competitors complete access to NFC technology to facilitate the development of alternative wallets.

Apple was invited to respond to the EU’s Statement of Objections from May 2022. The subsequent significant development occurred in January 2024, when it proposed modifications to resolve the case.

It proposed providing a set of APIs that would enable third-party mobile wallet and payment service developers to obtain expanded access to NFC functionality on iOS devices without the need to use Apple’s payment or wallet technology.

This access would be provided free of charge.

The offer would continue to prevent competitors from accessing a unique microprocessor on Apple devices known as the secure element, which is employed to improve the security of transactions conducted with Apple Pay.

However, Apple stated that it would offer “equivalent access” to NFC components by utilizing a mechanism known as “Host Card Emulation (HCE) mode.”

It was stated that this would enable third-party wallets to securely store payment credentials and complete transactions using NFC without requiring access to the secure element.

At the time, Apple also committed to providing third parties with supplementary features and functionality, such as defaulting preferred payment applications and access to authentication features like Face ID, its biometric authentication technology.

It also pledged to implement FRAND (Fair, Reasonable, and Non-Discrimination) terms when determining whether to grant access to NFC.

Greater dedication
Vestager announced on Thursday that it had accepted Apple’s offer following its request for specific enhancements.

“It may have had a detrimental effect on innovation by excluding competitors from the market.” This decrease in innovation and choice is detrimental.

It violates EU competition regulations and is detrimental to consumers. She stated that Apple had made a series of commitments earlier this year to address these concerns.

“We have been testing a package for the past month and have received feedback on the effectiveness of the remedies and their ability to address our concerns.”

There was considerable interest in the matter. Numerous financial associations, banks, app developers, and card issuers provided us with feedback.

We thoroughly examined those comments and requested that Apple enhance its commitments.

Apple subsequently provided enhanced remedies, and we can now impose those remedies on Apple.

The Commission’s press release details how Apple has improved its January offer in response to industry feedback. However, it includes a commitment to:

Developers are no longer required to possess a Payment Service Provider (PSP) license or a binding agreement with a PSP to access the NFC input.

Adapting the HCE architecture to align with the evolving industry standards that Apple Pay employs;

Additionally, the deadlines for dispute resolution may be shortened.
Following the EU’s opening of the Apple Pay antitrust case, the bloc has updated its competition rulebook.

This update is designed to increase the contestability of digital markets by imposing upfront obligations on several major platforms, such as Apple’s iOS.

This will prevent tech giants from preventing competitors from accessing the critical infrastructure they operate.

The Digital Markets Act (DMA) is the goal of EU legislators, seeking to expedite the process of reestablishing digital dominance and competition in tipped markets.

The company implied that the proposed changes also comply with DMA requirements shortly after the EU announced it was consulting with industry stakeholders on Apple’s Apple Pay offer.

Vestager stated that the EU has accepted Apple’s commitments on Apple Pay, which exceed the DMA’s requirements.

“They incorporate dispute resolution mechanisms and monitoring,” she observed, adding, “This demonstrates that the DMA is inextricably linked with antitrust enforcement.”

“Apple can no longer prevent mobile wallets from entering the market by utilizing its control or the iPhone ecosystem.”

These changes will benefit consumers and competing wallet developers, as they will facilitate innovation and choice while ensuring payment security.

Apple is required to adhere to the commitments for ten years. Failure to comply with them may result in severe penalties.

“Apple’s commitments are now legally binding due to today’s decision.”

An EU spokesperson informed us that the Commission may impose a fine of up to 10% of Apple’s total annual turnover or a periodic penalty payment of 5% per day of its daily turnover for each day of non-compliance if Apple fails to honor such commitments, without the need to establish an infringement of EU antitrust rules.

When contacted for comment, an Apple spokesperson issued the following statement:

“Apple is offering developers in the European Economic Area the ability to enable NFC contactless payments and contactless transactions for car keys, closed-loop transit, corporate badges, home keys, hotel keys, merchant loyalty/rewards, and event tickets from within their iOS apps” using Host Card Emulation-based APIs.

Apple Pay and Apple Wallet will remain accessible to users and developers in the EEA.

They will continue to offer a secure, private, and effortless payment method and the ability to present credentials seamlessly from Apple Wallet.

The Commission’s commentary was incorporated into this report.