For Apple, the iPhone and App Store have historically been the linchpin of its ecosystem, with the hardware serving as a gateway to a wide range of services that create a continuum of commerce, content and payments.
But Apple has opened up its payments technology and App Store to European rivals, potentially loosening some of the strings that tie users to its services, such as Apple Pay and Apple Wallet.
Given ongoing regulatory scrutiny and the legal battle in the Epic Games case, the next market to see expanded access may be the United States.
The European efforts, and its U.S. battle with the Department of Justice over antitrust charges (more on that below), come at a time when Apple is relying on its services division to make up for the volatile nature of its declining hardware sales.
The impact on the services component, particularly payments and apps, may be unclear at this point, but it’s equally unclear whether the just-announced effort to expand Apple Pay “outside iPhone” will survive this week’s events.
The EU event on Thursday (July 11) will focus on what’s being called “tap and pay” technology, while elsewhere Apple is allowing the Epic Games store app for its operating system.
As PYMNTS reported on Thursday, Apple has avoided fines from European Union regulators by agreeing to offer its Tap and Go technology to other companies, ending a four-year-old antitrust investigation.
The agreement, which is binding for the next 10 years, sees Apple agree to give third-party wallet providers free access to NFC input on iOS devices, even if they don’t use Apple Pay or Apple Wallet.
On the technical side, Apple enables access to NFC in Host Card Emulation Mode (“HCE”).
“HCE allows payment credentials to be securely stored and transactions completed using NFC without relying on a secure element in the device,” the EU regulator said in its announcement.
Additionally, Apple must “apply fair, objective, transparent and non-discriminatory procedures and eligibility criteria for granting NFC access to third-party mobile wallet app developers.”
Additional Commitment
Additional efforts will focus on allowing payments to be initiated using the HCE payment app “when enabled, on merchant phones and other industry-certified terminals such as devices used as terminals (so-called SoftPOS).”
We also note that the pool of potential developers adopting NFC access is expanding now that Apple has agreed to remove the requirement for developers to be licensed as a payment service provider or enter into a binding contract with a PSP in order to access NFC input.
Developers will also be allowed to “pre-build payment apps” for third-party mobile wallet providers, which means the wallets could become the default option for users, potentially increasing competition for Apple Wallet itself. For companies like PayPal, which has its own tap-to-pay feature, and Samsung, which has a wallet, third parties having access to the same technology could be a boon for their own mobile payment efforts.
PYMNTS reached out to Apple for comment but had not received a response at the time of writing.
App Store
As for the App Store, Apple approved Epic Games’ Marketplace app for iPhones and iPads in Europe earlier this month, as noted in a tweet from Epic Games and subsequent reports. We reported last week that the approval came after Epic Games, maker of the popular game “Fortnite,” accused Apple of blocking its attempts to establish a games store on Apple devices.
In the United States, Epic’s lawsuit against Apple, dating back to 2020, may have been the “epicenter” of increased regulation of Apple’s in-app purchases, fees, and general structure of access to the App Store. Epic argued that Apple had established itself as a monopoly by collecting a 30% fee from in-app purchases and other practices.
What’s next?
While the above changes are specific to the EU, the tech giant is facing similar regulatory scrutiny in the United States.
The Justice Department filed a lawsuit against Apple in March, focusing on allegations that the company is stifling competition by restricting developer access to content and payment-related technology. The European action could signal at least some communication and commitments between Apple and regulators regarding its developer contracts.
Meanwhile, as PYMNTS reported last month, Apple has announced new initiatives aimed at expanding the reach of Apple Pay and Apple Wallet beyond iPhones and credit and debit cards: Payment capabilities will move beyond smartphones and tap-and-pay, new features will be available on other Apple devices (such as iPads), and Apple Pay will also be available on Windows computers and Google Chrome browsers.
In these cases, Apple Pay will also be a payment option available on PC. Elsewhere, banks will be able to offer financing options built into Apple Pay, in addition to rewards and programs.
Additionally, Apple Cash’s Tap to Cash allows users to send and receive Apple Cash by holding two iPhone devices together. Among the new financing options is Affirm’s “Buy Now, Pay Later” service, available when users check out with Apple Pay.
It remains to be seen what impact this will have, as opening up Apple Pay to EU rivals will at the same time decoupling it to some extent from the phone itself.
Apple’s services revenue is growing at double digits year over year, but as we can see here, hardware is declining, with iPhone sales down 10% year over year in the most recent quarter. Any future realignment in the competitive landscape could cause cracks in the foundations of the Apple ecosystem.
