- Britain’s competition regulator wants Apple to let rival payment apps use the iPhone’s tap-to-pay technology more easily and at much lower fees.
- Apple says the change could weaken privacy and security protections, but the CMA says evidence it reviewed suggests neither technology raises inherent security concerns.
- The public can comment on the proposal until Nov. 17, and then the CMA will make a final decision.
Tapping an iPhone to pay could come with more choices in Britain under a proposal unveiled Tuesday that would make it easier for competing services to challenge Apple Pay.
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The Competition and Markets Authority, or CMA, wants Apple to give developers broader access to the technology behind contactless transactions on terms that make competing products commercially viable. The regulator says its proposal could encourage new payment apps, digital keys and travel passes, while Apple argues the required approach could weaken privacy and security protections.
“We welcome the steps the CMA has taken to boost competition and innovation,” David Geale, executive director for consumers, payments and competition, said. “Improved access and substantially lower fees should create greater competition and more choice for consumers and businesses.”
Opening the door to more payment apps
The technology that lets an iPhone pay for groceries with a tap could also give competing payment apps a way in. Known as near-field communication, it allows a phone to exchange information with a nearby payment terminal.
Britain’s competition regulator wants developers to have more options for accessing that technology, making it easier to offer alternatives to Apple Pay.
Apple currently allows British developers to offer contactless services through its secure element system, which stores sensitive payment information in protected hardware on the device and is a particularly technical approach.
The proposal would require Apple to support another established approach, called host card emulation, that is a method developers already use in the European Union and would bring payment services already offered in Europe to Britain without requiring a different setup.
“By removing barriers to entry, we can help create the conditions for brilliant British businesses with great ideas to develop new products and services here,” Sarah Cardell, chief executive of the CMA, said in an official press release announcing the proposal.
In addition to requiring Apple to provide access through host card emulation, the proposal moves to regulate how much Apple charges for that access. According to the CMA, if prices for developers to use the tap-to-pay technology are too high, companies still can’t build a product that makes money.
The CMA says it won’t set the price itself, but that it will set rules for how Apple works out a fair price. It expects those rules to produce fees that are much lower than Apple charges now, yet high enough to pay Apple fairly for building and running the technology.
Because Apple already invested significant time and money on the secure element chip, a regulator forcing Apple to share the technology cheaply could cause the expected profit to shrink. Critics of the proposal argue that this could lead Apple, or any other company watching, to think twice before spending heavily on the next big technology, since regulators could force it open once it succeeds.
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Economists call this the “incentive to innovate,” though Apple has focused more on security concerns than being forced to share technology it built at its own expense.
Apple’s security argument
Apple says its existing system already gives developers access to contactless technology while protecting users’ sensitive information. The company argues that requiring another approach could weaken those safeguards.
“We do not believe the CMA should require Apple to adopt an approach with lower privacy and security protections,” an Apple spokesperson said in a statement. “We will continue to engage constructively to reach an outcome that is in the best interest of our users.”
At the heart of the dispute is a technical difference between two ways of making tap-to-pay work. Apple’s current system stores card details on a “secure element,” a separate, tamper-resistant chip that is isolated from the phone’s main software. The alternative, host card emulation, handles payments through ordinary software running on the phone’s main processor. Instead of storing the real card number, it uses temporary stand-in numbers called tokens that expire quickly.
Host card emulation is cheaper to build and easier for companies to roll out, but Apple says it also leaves users’ payment credentials more exposed if the device’s software is hacked.
Apple argues that its design keeps important information off the main processor as well as its own servers, and being forced to shift to host card emulation would endanger the security and privacy of its users.
The CMA disagrees, saying evidence it reviewed suggests that “neither technology raises inherent security concerns” and allowing both systems would support the widest range of uses and let British firms launch payment services already offered in the EU.
“We have heard that high fees, strict terms, and technical restrictions relating to Apple’s contactless technology make it too difficult for challengers to innovate and compete,” Cardell continued in the press release.
What happens next
The proposal is open for public comment until Nov. 17, after which the CMA will assess responses before making a final decision. The consultation gives Apple, competing developers and other interested parties an opportunity to weigh in on how access should work and what terms would make competing services viable.
For iPhone users in Britain, the eventual outcome could mean more choices when paying for groceries, boarding a train or unlocking a hotel room. Whether those options materialize will depend on the final rules and which companies decide to build services under them.
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