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Apple’s commitments on its near field communication (NFC) software will not fully level the playing field for EU mobile payment services, the European Central Bank (ECB) has said.
In a letter to the European Commission’s internal market chief, Thierry Breton, ECB board member Piero Cipollone also said that the success of the digital euro project could be at risk if Apple’s current commitments are not extended.
The commission is carrying out an antitrust investigation into Apple over restrictions it places on its NFC technology. Apple has offered measures to open up access, and the commission has asked stakeholders for their views, prompting Cipollone’s letter.
Apple’s proposed commitments would not give third parties full access to the secure element (SE) in its NFC, only allowing for the usage of Host Card Emulation (HCE). This would result in a user experience worse than that offered by Apple Pay when it comes to authentication and transaction speed, Cipollone said.
“This is why we believe that the current proposed commitments fall short of ensuring a truly equal level playing field for a third-party payment solution in terms of end-user experience for in-store payments with iOS smartphones,” he wrote.
The ECB official suggested in his letter to Breton that if the proposed commitments were also applicable to a potential digital euro, they would not guarantee that digital euro payments made using iPhones were seamless and user-friendly. It is “vital” that SE access is allowed for offline digital euro payments, he said.
The commission’s antitrust investigation, and Apple’s proposed commitments on access to NFC technology, are also limited to in-store payments with iOS smartphones.
As reported previously by Vixio, the ECB points out that this leaves “unaddressed” the issue of restricted access to NFC technology in several other payment scenarios.
For example, in the context of in-store payments, wearables such as Apple Watches are omitted, directing transactions exclusively through Apple Pay rather than third-party payment apps.
Additionally, the proposed commitments do not address the acceptance of Apple devices by merchants, potentially limiting options beyond Apple Pay for in-store transactions; e-commerce scenarios are disregarded, suggesting that third-party payment apps may not match Apple Pay's user experience where SE access is needed for a seamless checkout.
Further, Cipollone says that person-to-person payments are “entirely excluded”, despite their significance in the context of the digital euro, as highlighted in the regulation proposal.
Regulating the NFC
When Apple first made its commitments to the commission regarding NFC technology, a lot of payments insiders were surprised by the lack of fight from the usually feisty big tech giant.
However, beyond the headlines, it is clear that Apple would not be entirely opening up its system, and currently the EU’s regulatory landscape cannot force it to.
Although the flagship Digital Markets Act (DMA) is now enforceable, and Apple is regarded as a “gatekeeper”, the DMA would not allow access to the SE for all potential digital euro users because it applies only to companies that the commission designates as gatekeepers and to those services that the commission designates as core platform services.
This currently means that SE access would not be granted for mobile phones produced by other companies, mobile phones running on different operating systems, and wearables and tablets running on different operating systems.
However, the importance of access to the NFC features and to the SE has been considered in the proposed digital euro regulation: Article 33 requires original equipment manufacturers and providers of electronic communication services to make the SE in their devices accessible to front-end service providers on fair, reasonable and non-discriminatory (FRAND) terms.
“We believe that such access should be open and not dependent on other mobile operating system applications,” Cipollone writes in his letter. “This would help ensuring that digital euro payments on mobile devices are secure, seamless, and user-friendly.”
Cipollone has said that the EU must be “highly ambitious” in its implementation of Article 33 if it wants to fully achieve non-discriminatory access.
