Finance Everywhere, Who owns the customer

Apple faces regulatory troubles and payments are at the heart of it

  • Digital wallets are central to the recent lawsuit filed against Apple.
  • Although this lawsuit by the US Justice Department is new in the US, it builds upon precedent set by the EU.

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Apple faces regulatory troubles and payments are at the heart of it

The news: The US Department of Justice (Antitrust Division), State of Michigan, State of Minnesota, State of New Hampshire, State of New York, State of North Dakota, State of Oklahoma, State of Oregon, State of Tennessee, State of Vermont and the State of Wisconsin have collectively filed this lawsuit against Apple.  These plaintiffs argue that the company has “for many years” used App Store guidelines to demand higher prices and “thwart innovation” rather than competing on lower prices for consumers and better monetization structures for developers. 

While the lawsuit is wide-ranging, digital payments and wallets are at the heart of the case. 

For example, the lawsuit alleges that since the company restricts consumers from using their banking apps as digital wallets, it is able to own the customer entirely as well as the “stream of income” that comes from using only Apple authorized products in the digital wallet. 

The lawsuit also states that given the size of iPhone users and its restrictive policies, competition in areas like digital wallets suffers because it is not favorable to put apps on the market that are inaccessible to iPhone users. 

The details: The lawsuit argues that Apple uses its “control over app creation” and API access to restrict third-parties from offering digital wallets that have tap-to-pay features. These restrictions effectively guard the monopoly of Apple Wallet and Apple Pay, the lawsuit states. 

Apple’s guidelines on digital wallets also impact transitions away from the iPhone as well as how users interact with their financial institutions. Since iPhone users are only able to use Apple’s digital wallet and payments app, friction is introduced in the process of transitioning away from the ecosystem.

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