The Australian Competition and Consumer Commission on Friday denied an application by the Commonwealth Bank, Westpac, National Australia Bank, and Bendigo and Adelaide Bank to bargain as a group against Apple and collectively boycott its payment system, Apple Pay.

Apple Pay allows customers to use their phones like tap-and-go bank cards. While ANZ has already done a deal with Apple, the other three banks have been resisting over the commercial arrangements that would underpin such an arrangement.

"The ACCC is not satisfied, on balance, that the likely benefits from the proposed conduct outweigh the likely detriments. We are concerned that the proposed conduct is likely to reduce or distort competition in a number of markets," ACCC chairman Rod Sims said.

Mr Sims said the inability for customers to easily switch between banks was also a factor in the decision.

He said the Apple Pay wallet provided a "multi-user" platform, meaning it was easy to switch between different bank cards.

"The banks are very profitable in Australia and charge very high rates on some products, but customers still find it hard to switch," he said.

"Had the banks been successful, there was the potential for that stickiness to increase."

He said while the ACCC accepted that the opportunity for the banks to collectively negotiate and boycott would place them in a better bargaining position with Apple, "the benefits would be outweighed by detriments".

Other issues in particular stood out, according to Mr Sims:

• Apple and Android compete for consumers with distinct business models. If the banks were successful in obtaining access to tap-and-go smartphone technology, it would affect Apple's integrated hardware-software strategy for mobile payments and operating systems more generally and impact how Apple competed with Google, the consumer watchdog said.
• Digital wallets and mobile payments were in their infancy and subject to rapid change. While consumers were used to making tap-and-go payments with payment cards, there was a range of alternative devices for mobile payments such as using a smartwatch or fitness device. Access to the technology in iPhones for the banks was "likely to hamper the innovations that are currently occurring" for mobile payments and could reduce the competitive tension between the banks in the supply of payment cards, the ACCC found.
• Apple Wallet and other multi-issuer digital wallets could increase competition between the banks by making it easier for consumers to switch between card providers and limiting any "lock-in" effect that bank digital wallets might cause, the watchdog said.

The banks issued a joint statement shortly after the decision, saying it was disappointing after the ACCC had previously described the decision as "finely balanced".

The banks involved would now individually review their positions and figure out how to design their mobile wallets and payment systems. They have 21 days to appeal the decision.

"This case has always been about consumer choice. The applicants made this application to seek to ensure they could participate in the future of mobile wallets, and not have the course of development for mobile wallets in Australia dictated by a single overseas corporation," payments specialist and spokesperson on behalf of the applicants, Lance Blockley, said.

"Mobile wallets are currently overwhelmingly focused on mobile payments, but will soon take in loyalty programs, mass transit ticketing, access, identity and a great number of other future innovations. Ultimately there is no technical barrier standing in the way of our entire physical wallet becoming digital.

"Apple has a stated desire to own the entire mobile wallet, and will use the beachhead into mobile wallets afforded to them by complete control over mobile payments on iPhone to exert control over the rest of the digital wallet. This in our view is aimed at increasing the services revenue they can earn from iPhone users."

Mr Sims said the decision was not a win for Apple, and that the ACCC was not required to consider the fact that Apple was an overseas company.

"In making competition decisions, obviously the domicile of companies is not something that we can or should be concerned about," he said.

He said the decision would encourage innovation and competition in the digital wallet market, which would benefit consumers.

"Obviously what the banks would want to do is have such a great digital wallet it would lock you in.

"All we're talking about here is a chip. You can put a chip in anything. Some are presuming everything will be done through a mobile phone, it may be with this decision the banks and others decide they'll put the chip in other devices. We didn't want to stop that competition between devices."

An Apple spokesperson welcomed the decision. "We look forward to continuing to work with individual banks in Australia and around the world to bring Apple Pay to their customers too."