Apple set for UK legal fight over iPhone tap-to-pay rules

Apple is gearing up for a fight with the UK’s competition watchdog, which aims to force the iPhone maker to open up its digital wallet technology to rival payments providers — a move that would deal a blow to the dominance of its Apple Pay service.

The Competition and Markets Authority is set to publish proposals for consultation next week that will argue Apple exercises unfair power over the UK’s “tap-to-pay” market, according to several people familiar with the matter.

The CMA will recommend changes to the iPhone’s operating system that would allow users to choose alternatives to Apple Pay when using the device’s tap-to-pay feature.

The measures will form part of the CMA’s conduct requirements on Apple after it handed the company so-called “strategic market status” in relation to its mobile platform under the UK’s digital competition rules last year. The regulator ran a consultation this summer on the wallets issue after hearing complaints about Apple’s grip on the market.

The CMA is designating companies with an outsized influence in digital markets with SMS status, which would force them to abide by certain rules. The designations last for five years, with fines of up to 10 per cent of global turnover for breaching the rules.

Apple, which has already taken steps to open up its payment system following regulatory pressure in other markets, is likely to challenge the decision through the courts, according to two people briefed on the matter.

Apple did not respond to requests for comment. The CMA declined to comment.

Any move by the CMA to open up access to the iPhone’s payment chip will be a coup for fintechs such as PayPal, Revolut and Monzo, as well as traditional banks, which have long argued that they are shut out of the tap-to-pay function in the UK because of Apple’s rules.

Banks and fintechs have also complained about the 0.15 per cent cut that Apple takes on credit card charges made through Apple Pay.

In most markets, including the UK, Apple Pay enjoys preferred access to the Near Field Communication (NFC) chip, which communicates with payment terminals in retailers and transport networks.

Apple argues that restricting NFC chip access to its own wallet service protects users’ security and helps fight fraud.

The CMA is likely to recommend that the UK moves towards a European-style system. Under the EU’s Digital Markets Act, Apple has been forced to open up NFC access so that a host of other operators can build their own wallets, which users can choose as their default payment option.

In 2024, Apple introduced a system across several countries, including the UK, where payments companies can access the NFC technology — but only if they enter commercial agreements with Apple, commit to its security and privacy rules and pay “associated fees”.

Competition authorities are concerned that the current system is anti-competitive. They say British consumers are missing out because providers are not willing to build two different wallets for both Europe and the UK, according to two people familiar with the discussions.

One person said there were concerns that products were not making their way from Europe to the UK, hampering Britain’s large fintech industry and potentially impeding innovation.

The move comes as the CMA attempts to reposition itself after the government ousted its chair last year and urged the watchdog to focus on UK economic growth. Since then, the CMA has been trying to speed up its investigations and give businesses more certainty, and taking a less interventionist approach to mergers and acquisitions.