Apple Could Give Rivals Access To Its Apple Pay Tech To Address EU Competition Concerns

Apple ( AAPL ) proposed allowing third-party mobile wallet and payment services providers access to its Apple Pay ecosystem in the European Union to settle regulator concerns that it could stifle competition.

The European Commission said in its preliminary view that the iPhone maker “enjoys significant market power in the market for smart mobile devices and a dominant position on mobile wallet markets on iOS” that could “restrict competition in the market for mobile wallets on iOS devices.”

In response, Apple offered it could allow third-party mobile wallet and payment service providers in the EU “to access and interoperate” through Apple Pay application programming interface (API) “on iOS devices free of charge, without having to use Apple Pay or Apple Wallet.”

Apple said it would also provide “additional features and functionalities,” such as FaceID, as well as applying “fair, objective, transparent, and non-discriminatory eligibility criteria to grant” third parties access to Apple Pay hardware, including a process to dispute its decisions.

The European Commission said it would accept comments from the public on the proposed commitments from Apple before determining if the proposal adequately addresses competition concerns.

If accepted, the proposed commitments would be in effect for 10 years, and Apple could be fined up to 10% of its worldwide turnover if it fails to honor them.

While Apple Pay accounts for a relatively small share of Apple’s total revenue, it represents a source of potential growth for the company as the use of digital payments expands, and the proposed changes could impact Apple’s market share compared to other leading mobile wallet providers such as Google Pay by Alphabet ( GOOGL ), Venmo, and PayPal ( PYPL ), among others.

“Digital wallet usage continues to increase, representing ~20% of non-cash transactions,” Jefferies analysts said in a research report earlier this week, noting that Apple Pay is accepted by 41% of merchants surveyed in Europe, with close to one-fifth (19%) of merchants who don’t already accept it saying they would consider accepting it within the next 12 months.

Apple Pay is estimated to have brought Apple roughly $2.06 billion in revenue in 2023, up 39% from about $1.48 billion in 2022, according to consensus estimates compiled by Visible Alpha, and accounting for approximately 0.5% of Apple’s total revenue of $383 billion in 2023.

Apple shares were up 1.6% to $191.56 per share Friday, and have gained more than 38% over the past year.