Sunday, August 16, 2015

Apple Payment Hits Roadblock In Australia, the Kind Banks Will Live To Regret

Source: Sydney Morning Herald.

Here is a worthy Sunday read regarding Apple's attempt to break into the Australian payment system where banks are so far successful in stonewalling Apple's attempt to offer Apple Pay to its Australian iPhone users. The sticking point appears to be the fee Apple would earn on each $100 transaction. And it does appear that the banks there have an upper hand given the structural payment system in place and what many perceived to be a lukewarm acceptance of Apple Pay else.

It is worth noting in the post that the banks there seem to pride itself in "innovations" that it has brought to payments and the banking system in general. Whether that is true or not and if it really has a role on banks balking giving Apple a helping hand to extend its mobile payment system to Australia remains to be seen.

People seems to like through the word "innovation" around as if its use will magically enhance one's stature or product or company. So far, the solution the banks there seem to pride itself on are focus mostly on Android devices. And uptake has been dismal at best.

Apple Pay will come to Australia once Apple manages to find a crack, perhaps, by working first with a smaller bank. Eventually, lucrative Apple customers will either switch or pressure their own banks into working with Apple.

And things would be righted. That is the best scenario for the banks. However, if Apple find itself at odds time and time again with banks, look out. Many have already speculated whether Apple will eventually decide it is too much trouble working with the banks and decides to become a bank itself or issuing its own credit cards backed by its $200 billion cash. It would figuratively such much of the air out of the room. Imagine tens of millions of higher income or high net-worth iPhone customers banking with Apple Bank. It would cripple if not outright put many banks out of business.

If anything, it makes sense for banks to find a way to work with Apple instead of against Apple. A similar situation is playing out in the auto industry where car markers have been resistant or dragging their collective feet to keep Car Play out of their vehicles. Now, there is more than enough smoke that Apple will be entering the auto industry.

Perhaps, it is inevitable that Apple would enter some markets, auto and banking, that it has an indirect link to if it is frustrated or believes it can do better than the incumbents.

And how would Apple go about getting into the Australian market if the banks do no play ball.

It's like the 1980s Strategic Defense Initiative pressed by President Ronald Reagan popularly known Star Wars. It scared the Soviets enough to bring them to the table and started an arms race that bankrupted the Soviet Union (short story version).

Apple might deploy a similar strategy - let word leak that it might be interested in getting into the banking business to either open up markets or get better terms.

So, while the banks may have some success in the short-term in fending off Apple Pay in place of whatever "innovations" it has in place, they are only making matters worse in the long-term.

The best option for banks is to work with Apple, buy time, and hope that Apple leaves them alone or truly innovate and reinvent themselves for the eventuality.

- Posted using BlogPress from my iPhone

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