Apple Inc. (NASDAQ:AAPL), American Express Company (NYSE:AXP) – Why Apple’s next antitrust battle is likely to be about payments


Apple Inc. (NASDAQ: AAPL) bowed to pressure from regulators and App Store developers and made some concessions, but the next battleground will be on payments, according to the Bloomberg columnist Marc Gurman

Financial services key for services hitting the target: Apple’s policy of requiring iPhone owners to use Apple Pay if they want to make purchases over the phone is frustrating for competing financial apps, Gurman noted.

This policy means PayPal Holdings, Inc. (NASDAQ: PYPL) and Block, Inc. (NYSE: SQ) as well as financial institutions like JPMorgan Chase & Co. (NYSE: JPM) Chase, Citigroup, Inc. (NYSE: C) and American Express Company (NYSE: AXP) cannot launch tap-to-pay iPhone apps with their own functionality and interface, the Apple writer said. Moreover, they have to pay up to 0.15% fee for each Apple Pay credit card transaction, if they want to use the iPhone user base, he added.

Although this has been an issue for more than two years, the European Union is now getting involved by filing a formal antitrust complaint, Gurman said.

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Sales of Apple Pay and other financial services now make up a small proportion of Apple’s services business, likely reaching $1 billion a year out of the $20 billion for services business, estimates the Apple specialist.

“While $1 billion a year may seem small for Apple, it could mean the difference between meeting annual growth targets in the services segment or not,” Gurman said.

Apple could finally give in: Gurman said the biggest concern is for future revenue, given that expectations for contactless transactions as a percentage of total transactions will rise dramatically. The analyst estimates that in the future, it would cost Apple several billion dollars if it offered the tap-to-pay option to third-party apps.

Apple, however, argues that its insistence on reserving pay-per-touch capabilities for Apple Pay has more to do with privacy and security than money.

“The company claims that opening NFC [near-field communication] could harm its system and pointed to a 2016 report that NFC access on Android was compromised by hackers,” Gurman said.

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Even though Apple Pay is more convenient than anything third-party banks can offer, it shouldn’t hurt the tech giant to at least give consumers the option, the Apple writer said.

Gurman believes the European Commission could force Apple to make the switch.

Apple closed Friday’s session up 0.47% at $157.28, according to data from Benzinga Pro.

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