UK Watchdog Asks Apple to Widen Access to Its Contactless Payment Tech
Competition regulator says Apple's fees are blocking fintech firms; Apple warns wider access could weaken security
By AXY Tech Desk ·
Key points
- The UK Competition and Markets Authority wants Apple to widen access to its contactless payment technology and substantially lower the fees firms pay.
- The regulator says Apple’s current fees and charges are blocking fintech firms and others from innovating and growing, and it is consulting on measures to reduce them.
- The proposals would require Apple to allow apps to use Host Card Emulation, a contactless standard the company does not currently permit in the UK.
- Apple says wider access could undermine security and that its current arrangements already allow developers to offer secure contactless transactions in their apps.
The UK’s Competition and Markets Authority (CMA) has asked Apple to widen access to its contactless payment technology, saying the change could bring new payment, ticketing and travel apps to iPhone users in Britain and cut the fees that firms pay to use the system. The regulator says Apple’s current fees and charges are “blocking” financial technology firms, known as fintechs, and others from innovating and growing, and it is consulting on proposals it believes would cause those fees to fall. Apple has responded that wider access could undermine security and that its current arrangements already allow developers to innovate.
What the regulator is proposing
The CMA is the UK government’s competition watchdog. Its job is to promote competition between businesses and protect consumers, and it has the power to investigate markets where a dominant company may be limiting choice or charging unfair prices. In this case, the regulator says its proposals could lead to new digital wallets and digital keys, as well as ticketing apps, on UK smartphones.
The most specific measure in the proposals would require Apple to grant access to apps that make payments through a contactless technology standard called Host Card Emulation, or HCE. The CMA says Apple does not currently permit HCE in the UK. HCE is a widely used alternative approach that allows an app to process contactless transactions in software, rather than relying only on a dedicated secure chip inside the phone. Opening it up would mean that apps built by outside developers could use the iPhone’s contactless capabilities in ways they cannot today.
The CMA also wants the fees Apple charges firms for using its contactless technology to be “substantially lower”. Those charges are central to the regulator’s argument. A payments app, bank or ticketing company that wants to offer tap-to-pay features on an iPhone has to work within Apple’s rules and pay Apple for the privilege. The watchdog’s view is that these costs, together with the restrictions on how the technology can be used, are holding back smaller firms that might otherwise build competing products.
Why contactless payments have become central to daily life
Contactless payment means tapping a card, phone or wearable against a reader to pay, rather than inserting a card or entering a PIN for small transactions. Most contactless systems rely on short-range wireless technology known as near-field communication, or NFC, which works only when a device is a few centimetres from a reader. This is the technology that lets a phone open a train gate, pay for a coffee or unlock a car.
The CMA said nearly two in five payments are now contactless. It also said nearly 60% of people use digital wallets, which are apps that store payment cards and other credentials on a phone so they can be used for tap-to-pay. Apple’s wallet is the most popular digital wallet in the UK, according to the watchdog. Those figures help explain why the regulator is focusing on the phone’s hardware and software rather than on individual payment providers.
The key point for ordinary users is that a phone’s wallet is now a gateway to much more than payments. It can hold transit passes, event tickets, loyalty cards and car keys. If one company controls which apps are allowed to use the phone’s contactless hardware, and sets the terms and charges for doing so, it can influence which services succeed and which struggle to reach customers. The CMA’s proposals are therefore aimed as much at who can build products on top of contactless technology as at the payments themselves.
Apple’s argument on security and innovation
Apple has argued that widening access could undermine security. In a statement to the BBC, the company said its current arrangements had permitted developers in the UK and around the world to offer contactless transactions directly within their apps. It listed uses including in-store payments, transit passes, car keys and event tickets. Apple said its approach “enables developers and banks to create innovative products and services for their customers and facilitates competition between wallets, while ensuring users’ sensitive data remains protected by the highest security standards.”
Apple also said: “We do not believe the CMA should require Apple to adopt an approach with lower privacy and security protections. We will continue to engage constructively to reach an outcome that is in the best interest of our users.” The company is therefore not rejecting engagement with the regulator. It is disputing two claims at once: that its existing system is blocking competition, and that the alternative approach the CMA favours would be as secure.
This disagreement reflects a familiar tension in digital markets. Regulators tend to focus on whether a dominant platform is restricting rivals or charging them unfairly. Platform owners often argue that tight control over core hardware and software is what protects users from fraud and data misuse. Neither side is disputing that contactless payments must be secure. The dispute is over whether a different technical route, such as HCE, can meet the same standard, and who should judge that question.
The EU backdrop and the CMA’s narrower approach
Apple warned UK regulators last year against following the path taken by the European Union, which forced the company to open up a range of its technologies to rival firms. The EU’s measures were introduced under the Digital Markets Act, which imposes obligations on large platforms it designates as “gatekeepers”. Apple has said publicly that these rules create security and privacy risks, and it has criticised them.
The CMA has argued that its approach is different. According to the regulator, unlike the EU, it is focused on ensuring the interoperability of particular aspects of Apple’s technology, such as digital wallets and watches. Interoperability means that devices, software and services made by different companies can work together. In practical terms, the CMA is seeking targeted access to specific features, rather than a broad opening of Apple’s entire platform.
The distinction matters for both sides. A narrower set of obligations could limit how much changes and leave other parts of the iPhone ecosystem under Apple’s control. Critics of platform dominance may argue that targeted measures take longer to deliver results. Supporters of focused intervention may argue that access to a few key features, such as payment hardware, is precisely what competition needs in order to take hold.
Economic stakes for the UK’s fintech sector
The CMA said the UK is one of the world’s leading fintech hubs, generating more than £214 billion in turnover and supporting more than 360,000 jobs. That economic weight helps explain why the regulator is willing to press a major technology company on a specific technical feature. Fintech firms typically compete by offering faster payments, cheaper transfers, new ways to store cards and tickets, or services aimed at customers who are poorly served by traditional banks.
High fees and restricted access can affect both businesses and consumers. A firm that must pay a significant charge for each transaction or feature may find it harder to price its service competitively. A firm that cannot use a particular technology may have to build a weaker version of its product or abandon the idea altogether. Over time, consumers may see fewer choices, slower innovation and higher costs, although the size of these effects would depend on how the market responds to any changes.
Analysts following digital competition policy are likely to examine whether the proposals would deliver lower fees in practice, and whether those savings would reach users. Lower charges for developers do not automatically translate into lower prices for shoppers, because the benefit depends on how businesses choose to pass on savings or compete with one another.
What happens next
The CMA is consulting on its proposals, which means the measures are not yet in force. Feedback from Apple, banks, developers and other interested parties could lead to changes before any final decision. Analysts expect the consultation to focus on two central questions: whether the proposed access would genuinely reduce fees for firms, and whether it could be implemented without weakening the security protections that Apple says are essential.
Several developments are worth watching. The first is the detail of the consultation itself, including the specific fee levels the CMA is considering and the terms it proposes for HCE access. The second is Apple’s formal response, which the company has signalled it will pursue by continuing to engage with the regulator. The third is whether the CMA’s final decision addresses the security concerns Apple has raised, and how it treats the boundary between the UK approach and the broader EU model.
For iPhone users, the immediate effect is limited, because the proposals remain at the consultation stage. If they are adopted, however, consumers could see more choice in the apps they use to pay, store tickets and open car doors or other digital keys. Whether those benefits arrive will depend on how the security trade-offs are handled and how quickly developers can build and test new services. For now, the central question is whether a regulator can secure more open access to a key smartphone feature without weakening the protections that users rely on every time they tap a phone to pay.
Questions and answers
Why does the UK want Apple to widen access to its payment technology?
The Competition and Markets Authority says Apple’s current fees and charges are blocking financial technology firms and others from innovating and growing. It wants access widened and the fees to be substantially lower.
What is Host Card Emulation?
Host Card Emulation, or HCE, is a widely used alternative contactless technology standard. Its use allows apps to handle contactless transactions in software, and the CMA says Apple does not currently permit it in the UK.
What does Apple say about the proposals?
Apple says widening access could undermine security and that its current arrangements already let developers securely offer contactless transactions in their apps. It says it will continue to engage constructively with the regulator.
Are the changes already in effect?
No. The CMA is consulting on proposals, so the measures are not yet in force and could change after feedback from Apple, banks, developers and other interested parties.
Topics: Apple, Competition and Markets Authority, contactless payments, digital wallets, fintech, Host Card Emulation, iPhone, UK regulation
Sources: BBC Technology