Antitrust Suit Alleges Apple ‘Inhibits’ Cross-Platform Digital Wallets

Among the allegations contained in the U.S. government’s antitrust suit against Apple — as the tech giant is accused of acting as an anti-competitive monopoly in the smartphone market:

Apple, said the Department of Justice (DOJ), has “inhibited the creation” of cross-platform, third-party digital wallets, as it has prevented third-party apps from offering tap-to-pay functionality, inhibiting the creation of cross-platform, third-party digital wallets. 

And the means of impeding the progress? In part by preventing third-party apps from offering tap-to-pay.

Charges of Monopolistic Behavior

In the suit itself, filed on Thursday (March 21), and as detailed in PYMNTS coverage, the DOJ and 16 other state and district attorneys general accused Apple of monopolistic behavior, and said that at a high level, the company’s actions stymie the development of super apps that would make it easier for consumers to switch between smartphone platforms.

Delving into the filing itself, the suit notes that “digital wallets are an increasingly important way that smartphones are used and are a product in which users develop a great deal of comfort and trust as they typically contain users’ most sensitive information.”  

And in reference to competition, the digital wallets that can be used across platforms “allow users to move from one smartphone brand to another with decreased frictions.”

Denying Access?

The suit alleges “Apple has denied users access to digital wallets that would have provided a wide variety of enhanced features and denied digital wallet developers — often banks — the opportunity to provide advanced digital payments services to their own customers.” The monopoly that Apple holds over the smartphone market, the DOJ/states contend, prevents it from being “economically viable” for companies to build apps including digital wallets, “because they cannot reach iPhone users.”  

Apple’s hold on the digital wallet creation and digital deployment comes through its “technical and contractual control over API access,” which in turn keeps third-party developers from creating their own wallets to be used on the iPhone with that tap-to-pay functionality. 

“As a result, Apple maintains complete control over how users make tap-to-pay payments with their iPhone. Apple also deprives users of the benefits and innovations third-party wallets would provide,” said the suit, such as storing credentials and cards, and even tickets and car keys in a central location. 

“Absent Apple’s conduct, cross-platform digital wallets could also be used to manage and pay for subscriptions and in-app purchases,” per the allegations. By discouraging the development of those digital wallets, and the super apps themselves, Apple supposedly cements its ecosystem, as its Apple Wallet is available only on the iPhone.  

Switching to a different smartphone would mean that consumers would have to “leave behind the familiarity of an everyday app, setting up a new digital wallet, and potentially losing access to certain credentials and personal data stored in Apple Wallet.”  

A cross-platform digital wallet, the plaintiffs noted, would offer users an easy way to switch from the iPhone to another smartphone.

“Because many users already use apps created by their preferred financial institutions, if these financial institutions offered digital wallets, then users would have access to new apps and technologies without needing to share their private financial data with additional third parties, including Apple.

“Apple also uses its smartphone monopoly to extract payments from banks, which need to access customers that use digital wallets on iPhones,” charging those financial institutions 0.15% for each credit card transaction mediated by Apple Pay. Payment apps from Samsung and Google are free to issuing banks. 

“Apple’s fees are a significant expense for issuing banks and cut into funding for features and benefits that banks might otherwise offer smartphone users,” the suit alleges.  

As Karen Webster noted in a recent column, as iPhone sales are pressured, the company is “focused on Services revenue now to drive revenues and margin. Apple Pay transactions are very likely in the consideration set of assets for Cupertino to monetize in new ways.”

In the meantime, the legal battle’s been fully joined.