Opening the iPhone's chip is useless if Apple Pay still opens by default

A door is not a market

A rival payment wallet that works flawlessly and nobody ever opens is not a competitor. It is a demonstration.

That is the risk sitting inside the proposals the UK’s competition watchdog has put out for consultation: unlock the contactless technology on iPhones, lower the fees, strip out the technical barriers, and let Apple Pay’s rivals flourish. Every part of that is worth doing. None of it, on its own, produces a second wallet that anyone actually uses at a card reader.

What the phone really decides

Tapping a phone against a terminal involves three separate things going right. The short-range radio chip has to talk to the reader. The payment credential has to be held somewhere secure and authorised. And something has to decide which piece of software wakes up and offers to pay.

The first two are engineering problems, and they are what an access remedy naturally addresses. The third is a product decision made by the handset maker — which app appears when the side button is pressed, what happens when the phone is held near a terminal without the user doing anything, which wallet survives the next operating system update. That decision is worth more than the chip, because it is the only one that happens at the moment of payment, under time pressure, in front of a queue.

This is the practical test for the consultation. If the final remedy obliges access to the chip and says nothing enforceable about default assignment, the watchdog will have granted rivals the right to build something that users must deliberately dig for, every time, while the incumbent remains one press away.

Fees are a price, not a market

Lowering the fees is the other half of what is proposed, and it is a real gain — those costs are borne by card issuers, which means by banks, which means ultimately by cardholders and merchants in ways nobody itemises. But a lower price for access to a channel that carries almost all the traffic is still a payment for the only channel that matters. Issuers will keep paying it, because that is where the taps are. Cheaper rent on the same monopoly is a transfer, not competition.

Competition would mean an issuer or a scheme able to credibly threaten to go elsewhere. That threat only exists if “elsewhere” can be reached by a user without changing their habits.

Write the remedy in behaviour, not capability

Three things would make this bite. First, a user who chooses a rival wallet as their default must be able to do it in a handful of steps, and it must stay chosen through software updates rather than quietly reverting. Second, functional parity: same responsiveness, same ability to work on a locked device, same behaviour at a transit gate, wherever the incumbent wallet has those properties. Third, access terms published as a standard offer rather than negotiated case by case under confidentiality — because secret terms let a gatekeeper set a price that is technically available and practically prohibitive, and nobody outside the room can tell the difference.

The case against

The strongest objection is security, and it deserves to be taken seriously rather than waved at. Payment credentials sit behind hardware protection precisely because phones are stolen and cloned, and a controlled chip with one trusted gatekeeper is a smaller attack surface than an open one. Fraud losses are real and they land on issuers and customers, not on regulators.

But that is an argument for certification, revocation and audit — conditions a wallet must meet to get access and can lose for failing — not for permanent exclusivity. A security rule that happens to leave exactly one firm holding the default is doing two jobs, and only one of them is security.

The second objection is that people chose an iPhone knowing how its wallet works, and tight integration is part of what they bought. True, but a handset choice is made once and lives for years, for reasons mostly unrelated to payments. It is not a payment choice renewed at every tap. And the cost of the arrangement falls heavily on issuers and merchants, who made no handset choice at all.

Why the stakes are larger than per-tap fees

The wallet is becoming the place where the choice of payment method is made — not just which card, but eventually whether a payment runs over card rails at all or moves directly between bank accounts. Whoever controls which wallet opens controls which options are presented at the moment of decision. That is a far bigger prize than a fee per transaction, and it is why the default button, not the radio chip, is the real subject of this consultation whether or not the document says so.