Apple’s stance of allowing only proprietary technology and hardware has stirred a legal probe in the European Union (EU). Faced with a potential $40B fine, the company has taken a major step forward. Apple has agreed to open its mobile payment technology to competitors, allowing users to choose the type of wallet they want to use for “tap and go” payments. 

EU officials have formally accepted the offer and will put it into a legally binding agreement, which will be in force for ten years. However, the resolution will only be applicable in European Union territory. The EU includes the majority of European states, with the exception of: Albania, Iceland, Liechtenstein, Moldova, Montenegro, North Macedonia, Norway, Serbia, Switzerland, and United Kingdom (which left the union in early 2020, after the so-called Brexit referendum).

Antitrust Case Against Apple

In 2020, the European Commission – the executive arm of the European Union – officially opened an antitrust investigation of Apple Store and Apple Pay. The European legislators’ main concern regarding to Apple Pay was the terms and conditions allowing merchant apps and websites to integrate Apple’s payment technology.

One of the key aspects analyzed by the commissioners was the fact that the “tap and go” NFC functionality was exclusively reserved for Apple produced devices. 

According to its executive powers, the European Commission has the right to impose antitrust penalties amounting to 10% of the company’s annual revenues. For Apple, this would have translated into $40B in fines, as well as loss of business reputation and goodwill.

Apple’s Commitments to EU Users

Apple has until July 25 to implement changes to the Apple Pay system under EU’s Digital Markets Act, opening the NFC technology used for “tap and go” payments to API developers.

The main commitments agreed between Apple and the European Union include:

1. Free Access for Third-Party Wallet Providers

Apple will offer access to NFC in the Host Card Emulation (HCE) mode free of charge to third-party wallet providers. The providers will be able to access the NFC input on Apple devices through their own APIs, without using Apple Pay or Apple Wallet.

2. Transparent and Fair Eligibility Criteria

Apple will revise its terms and conditions for access to NFC technology and create non-discriminatory, objective and transparent eligibility criteria. Third-party mobile app developers must have access to a clear and complete set of rules, and gain access to the “tap and go” technology if they meet all of them.

3. Easy Set-Up of Default Payment Wallet

iPhone users must be able to set up their preferred payment wallet and use all the core functionalities of Apple Pay, including Field Detect (which launches the payment app in the proximity of a NFC reader) and authentication options, such as Face ID, Touch ID or passcode input.

4. Independent Review of Restriction Decisions

Apple must set up a mechanism to monitor access to its NFC technology and a separate procedure for settling disputes with mobile wallet developers. These mechanisms should be set up in a way that allows an independent review of any decision to restrict access to the “tap and go” technology.

5. Area of Applicability of the Commitments

All the commitments made by apple must apply indiscriminately to all third-party mobile app developers located in the European Economic Area (EEA). Also, all iPhone users whose Apple ID is registered in the EEA must benefit from the ability to use any mobile wallet. This right will remain in force even when the users travel outside the EEA territory for a period of time.

Apple’s decision to open up its NFC technology to rival digital wallets marks a significant shift in the mobile payments landscape. For consumers in the EU, it promises greater choice and enhanced services. For competitors, it offers new opportunities for growth and innovation. And for regulators, it sets a powerful precedent in the ongoing effort to ensure fair competition in the digital economy.