Apple Allows 3rd-Party Wallet Apps in EU

In a significant shift, Apple has agreed to open its Near-Field Communication (NFC) technology to third-party mobile wallet apps in the European Union (EU). This development comes in response to the European Commission's competition concerns under EU antitrust rules, which deemed Apple’s previous restrictions as an abuse of its dominant market position.

Background: EU Antitrust Concerns

The European Commission’s investigation into Apple’s NFC practices revealed several competition concerns. Primarily, Apple Pay was the only mobile wallet with access to the NFC input on iOS devices, effectively monopolizing the in-store mobile payment market for iPhone users. This exclusionary practice stifled innovation and reduced choices for consumers.

The Commission's Findings

• Dominance in Market: Apple was found to have significant market power in the smart mobile devices market and a dominant position in the in-store mobile wallet market on iOS.
• Exclusion of Rivals: By restricting access to the NFC input, Apple limited the ability of competing mobile wallet developers to innovate and offer alternatives to consumers.
• Article 102 Breach: Such conduct was considered a potential violation of Article 102 of the Treaty on the Functioning of the European Union (TFEU), which prohibits the abuse of a dominant position.

Apple's Commitments

To address these issues, Apple proposed and later refined a set of commitments. These commitments are legally binding and aimed at ensuring fair competition and fostering innovation in the mobile payments space.

Key Commitments

• NFC Access: Third-party wallet providers will now have free access to the NFC input on iOS devices without needing to use Apple Pay or Apple Wallet.
• Host Card Emulation (HCE): Apple will allow apps to access NFC in HCE mode, allowing secure storage of payment credentials and completion of transactions via NFC without relying on an in-device secure element.
• Fair and Transparent Procedures: Apple commits to applying fair, objective, transparent, and non-discriminatory criteria for granting NFC access to third-party developers.
• User Flexibility: Users can easily set an HCE payment app as their default for in-store payments, leveraging functionalities like Field Detect, Double-click, and authentication tools (Touch ID, Face ID, passcode).
• Monitoring and Dispute Resolution: An independent review mechanism will be established to monitor Apple’s access decisions and resolve disputes.
• Compliance across EEA: The consumer-related commitments must apply to all iOS users with an Apple ID registered in the European Economic Area (EEA). The changes related to third-party apps must apply to all EEA-based app developers.

Amended Commitments After Market Testing

Following a market test between January and February 2024, as well as consultations with various interested third parties, additional commitments were made to address concerns raised during the test period.

1. Extended Payment Initiation: HCE payment apps will be able to initiate payments at more types of industry-certified payment terminals, including software-based POS solutions.
2. Combined NFC Functionalities: Developers will be allowed to combine HCE payment functions with other NFC use cases.
3. Removal of Licensing Requirements: Developers will not necessarily need a Payment Service Provider (PSP) license or an agreement with a PSP to use the NFC system.
4. Pre-building Payment Apps: NFC access will be granted to developers for pre-building payment apps for third-party mobile wallet providers.
5. Updated HCE Architecture: Apple commits to maintaining the HCE architecture according to evolving industry standards, even if Apple Pay itself stops using HCE.
6. Simplified Default App Setup: Developers will be allowed to prompt users to set their default payment app and link users directly to the NFC settings page.
7. Industry Standards Compliance: Apple will protect any confidential information obtained during audits of, and will adhere to the same industry standards as developers of HCE payment apps.
8. Enhanced Dispute Resolution: Apple agreed to a shorter dispute resolution timeline than what was originally proposed.