Apple Inc. has unveiled plans to open up the iPhone’s NFC chip to third-party developers in an unprecedented move. This groundbreaking decision to open access for Apple tap-to-pay means that banks and other financial institutions will now have the opportunity to create their payment systems within the iOS platform. This development, set to be introduced in the highly anticipated iOS 18.1 update, marks a significant shift in Apple’s approach to its payment ecosystem.
The decision to open up the NFC chip comes as a response to mounting regulatory pressure, particularly from the European Union, to promote competition within digital payment systems. Until now, the NFC chip has been exclusively dedicated to Apple Pay, facilitating secure transactions through short-range device communication.
Key Takeaways
- Apple Opens iPhone NFC Chip to Third Parties: Apple will allow third-party developers, including banks and financial institutions, to use the iPhone’s NFC chip for contactless payments, expanding beyond the previously exclusive Apple Pay system.
- Regulatory Pressure Drives Decision: Apple’s decision to broaden access to the NFC chip comes in response to regulatory demands from the European Union and the United States, aiming to increase competition in the mobile payments market.
- Developers Face Fees and Agreements: Third-party developers must sign commercial agreements and pay Apple fees to access the NFC chip and Secure Element, ensuring compliance with Apple’s security and privacy standards.
- Wider Availability with iOS 18.1: The new functionality will be available in iOS 18.1, initially in the US, UK, and several other countries, with plans to expand further. Users can also set third-party apps as their default payment option on iPhones.
Apple Tap-to-Pay: Expands NFC Access to Third-Party Developers in Response to Regulatory Pressure
On August 14, Apple Inc. announced that it would open the iPhone’s payment chip to third-party developers, allowing banks and other services to offer alternatives to Apple Pay. This decision comes in response to regulatory demands from the US and EU.
According to the company, developers in the US and UK will be able to use Apple’s NFC chip, which supports tap-to-pay functions, in the beta version of the upcoming iOS 18.1. This feature will also roll out in Australia, Canada, Brazil, New Zealand, and Japan, with more countries expected to be added later.
The tech giant announced that starting with iOS 18.1, developers can enable NFC contactless transactions using the Secure Element within their own iPhone apps, independently of Apple Wallet and Apple Pay.
Apple also stated that with the new SE (Secure Element) and NFC APIs, developers can facilitate in-app contactless transactions for various uses such as in-store payments, transit systems, car keys, student IDs, corporate badges, hotel keys, home keys, rewards cards, event tickets, and merchant loyalty programs. Support for government IDs is planned for future updates.
The European Commission (EC) has investigated Apple for years due to its exclusive control over the iPhone’s NFC capabilities. The EC accuses Apple of stifling competition in the mobile payments sector. This scrutiny eventually led Apple to grant third-party access to its tap-and-go technology within the region. In response, Apple announced in June that it would make its payment technology available to third parties, thereby avoiding a potential fine from the commission.
Previously, Apple permitted third-party access to NFC technology, such as reading NFC tags. Still, the EU’s antitrust proceedings compelled the company to open the iPhone’s Secure Element for mobile payments to competitors. This action prevented a possible antitrust fine that might have reached up to 10% of its yearly income, or roughly $40 billion.
As other regions begin to adopt similar regulatory approaches to those of the EU, Apple is proactively broadening NFC access to developers, possibly to preempt further regulatory challenges.
Margrethe Vestager, the EU’s Vice President for Competition Policy, stated that this change would allow competitors to effectively challenge Apple Pay in the mobile payments market for in-store transactions. She emphasized that consumers would benefit from a broader selection of secure and innovative mobile wallets. The regulator’s report added that broader access to this technology might encourage all providers to innovate and develop new features and services to retain their customers.
The issue with the NFC chip was also highlighted in a comprehensive antitrust lawsuit the US Department of Justice filed against Apple in March. The lawsuit accuses Apple of unlawfully sustaining a smartphone monopoly and claims that Apple prevents other payment services from competing with Apple Wallet. The company charges card issuers 0.15% for each transaction processed through Apple Pay.
A report from the US Consumer Financial Protection Bureau estimated that Apple Pay was used for about $200 billion in transactions in the US during 2022. Although Apple does not specify earnings from financial services, its services division, which includes Apple Pay, consistently shows double-digit solid growth. This division reached a record high in revenue last quarter.
Users will now have the option to designate a third-party app as their default payment app on their iPhone, a capability previously limited to Apple Pay, which was accessible via a double-click of the iPhone’s side button.
Apple stated that to make a contactless payment using these newly accessible APIs; users can launch the app directly or set it as their default contactless payment app in the iOS Settings. This will allow them to initiate a transaction simply by double-clicking the side button.
Older iPhone models are also anticipated to support these new features without restrictions on the NFC chip and security measures. This compatibility extends to models as early as the iPhone XR in 2018, consistent with iOS 18’s compatibility range. Notably, the NFC chip has been included since the iPhone 6, and the Secure Enclave has been present since the iPhone 5s. However, backward compatibility will depend on the iOS version and software security and be limited to devices supporting iOS 18.
Apple has stated that third-party developers must first sign a commercial agreement with the company to access the Secure Element (SE) and NFC capabilities. With the new policy, Apple will continue to charge “developers fees” for using the NFC chip. The specific amount of the fees has not been detailed publicly.
According to the company’s statement, this requirement ensures that only developers who comply with specific industry and regulatory standards and agree to uphold Apple’s security and privacy protocols will be granted access to the necessary APIs.
About Apple
Apple Inc. was established in 1976 by Steve Jobs and Steve Wozniak, initially focusing on selling Wozniak’s Apple I personal computer. The company is based in Cupertino, California, in the heart of Silicon Valley, and has played a crucial role in advancing modern computing through product innovation, design, and aesthetics. Apple also supports third-party developers, enhancing its products’ functionality and strengthening its position in the market.
The company’s product range includes the iPhone, Mac, iPad, Vision Pro, Apple Watch, and Apple TV in electronics; iOS, macOS, iPadOS, tvOS, watchOS, and visionOS in software; and services such as Apple Pay, Apple Card, Apple Music, iCloud, and Apple TV+. Apple has been the largest company in the world by market capitalization almost continuously since 2011, with some periods when Microsoft led in 2024. Apple reached significant financial milestones, becoming the first US public company to be valued at over $1 trillion in August 2018, and later reaching valuations of $2 trillion in 2020 and $3 trillion in 2022.
Conclusion
Apple’s decision to open its NFC chip to third-party developers signifies a major shift in its approach to mobile payments, driven by regulatory pressures from the US and EU. By allowing developers to access the Secure Element and NFC capabilities, Apple is expanding the competitive landscape for mobile payment services beyond Apple Pay. This move is expected to foster innovation among developers and provide consumers with more options for mobile wallets and contactless payment.
As Apple responds to these regulatory demands, it aims to maintain its revenue streams by balancing compliance with continued control over access to its technology.
