The European Union has accepted Apple's commitments over how Apple Pay will operate in a move to resolve a long-running competition investigation. Margrethe Vestager, the European Commission's vice-president who heads the EU's competition department, announced the development at a press conference on Thursday.
Apple has until July 25 to implement the change, which would allow rival mobile wallet developers to offer contactless payments over NFC, the technology that dominates in the EU. It would allow users to use “tap-and-go” payments, she said, and would also give them access to key iOS features like double-clicking to launch apps and using Face ID, Touch ID or a passcode for authentication.
Apple will also allow users to set a third-party wallet app as their default instead of its own Apple Wallet.
Following numerous complaints, the EU competition authority launched a formal investigation into Apple's mobile payment and mobile wallet technology, Apple Pay, in June 2020. The investigation initially covered Apple Pay in its entirety, but has since narrowed its scope to focus on Apple's use of its contactless payment technology.
Reporting its preliminary findings two years later in May 2022, the EU said Apple had abused its dominant position to block competitors from offering NFC-enabled contactless payments on iPhones, preventing them from developing competing mobile wallets and competing fairly with Apple Pay.
The EU specifically took issue with Apple's restrictions on competitors' ability to develop wallet apps that communicate wirelessly with NFC payment terminals, like Apple Pay, which it suspects allows Apple's contactless payment technology to unfairly gain market share. It also said it wanted Apple to provide full access to NFC so competitors could develop alternative wallets.
Apple was asked to respond to the EU's challenge in May 2022. The next big move came in January 2024, when the company proposed changes aimed at resolving the case. The company's proposal was to allow third parties developing mobile wallets and payment services full access to the NFC capabilities of iOS devices for free through a set of APIs, without using Apple's payment or wallet technology.
The proposal would still prohibit competitors from accessing a special chip in Apple devices, called the Secure Element, that Apple uses to add security to transactions using Apple Pay, but Apple said it would provide “equivalent access” to the NFC components through a mechanism called “Host Card Emulation (HCE) mode,” which would allow third-party wallets to securely store payment credentials and complete transactions using NFC without accessing the Secure Element, Apple said.
Other promises Apple made at the time included a pledge to provide additional features and functionality to third parties, such as default settings for preferred payment apps and access to authentication features such as Face ID, a biometric authentication technology. It also pledged to apply FRAND (fair, reasonable and non-discriminatory) terms when deciding whether to grant access to NFC.
Stronger commitment
Vestager said Thursday that she accepted Apple's proposal after requesting several improvements.
“The removal of competitors from the market may have had a negative impact on innovation. Reduced choice and innovation is harmful – it is harmful to consumers and unlawful under EU competition rules. To address these concerns, Apple put forward a set of commitments earlier this year,” she said.
“Over the last month, we tested the package and got feedback on whether the remedies would work and address our concerns. This issue received a lot of attention. Many banks, app developers, card issuers and financial associations gave us feedback. We considered those comments very carefully and asked Apple to improve its promises. Apple then proposed improved remedies, and today we have made those remedies binding on Apple.”
Further details of how Apple strengthened its January proposal in response to industry feedback can be found in the Commission's press release, including:
Eliminates the need for developers to have a Payment Service Provider (PSP) license or binding contract with a PSP to access NFC input. Evolves the HCE architecture to comply with evolving industry standards used by Apple Pay. Reduces dispute resolution deadlines.
Since launching the Apple Pay antitrust case, the EU has passed a revised competition rulebook, which aims to make digital markets more competitive by applying ex ante obligations to several major platforms, including Apple's iOS, and to prevent tech giants from blocking competitors' access to their key infrastructure. With the Digital Markets Act (DMA), EU lawmakers hope to reset the digital advantage and speed up the process of bringing competition back to markets that have been tilted against it.
Shortly after the EU announced it was consulting with industry players about Apple's Apple Pay offering, the company suggested its proposed changes also comply with DMA requirements.
Vestager said that Apple's commitments regarding Apple Pay accepted by the EU go further than those required by the DMA: “They include, for example, monitoring and dispute resolution mechanisms,” she noted, adding that “this shows that antitrust enforcement is closely linked to the DMA.”
“Going forward, Apple will no longer be able to use its control or the iPhone ecosystem to lock mobile wallets out of the market. Competitive wallet developers and consumers will benefit from these changes, increasing innovation and choice while of course keeping payments safe.”
The pledge is binding on Apple for 10 years, and failure to comply could result in stiff penalties.
When reached for comment, an Apple spokesperson provided the following statement: “Apple is providing developers in the European Economic Area the option to use host card emulation-based APIs 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. Apple Pay and Apple Wallet will remain available to users and developers in the EEA and will continue to provide an easy, secure and private way to pay, as well as seamlessly present your Pass from Apple Wallet.”