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Apple Pay data collection presents threat to banks' customer relationship management, says expert


The close link banks have with their customers might be weakened by the emergence of Apple's new mobile payment service, an expert has warned.

Apple Pay was launched in the US in September last year and is a mobile payment system that uses near-field communications (NFC) technology. NFC uses radio waves to transmit data between devices and allows contactless payments to be made. To make a payment the device and terminal must be close to each otherfor the data transmission to work. 

Apple has signaled its intention to expand the service into other markets and is reported to be in negotiations with UK banks over the extent of access to data that they can expect from banks as a result of any tie-up. However, the Daily Telegraph reported that some unnamed banking industry executives are concerned that giving Apple access to their data could give the technology company a foothold from which to grow further into their industry.

Last autumn Sanjay Sakhrani, an analyst with Keefe, Bruyette & Woods, highlighted a draft commercial agreement between Apple and US banks which, as well as detailing the financial terms of their prospective tie-up over Apple Pay, revealed that Apple was asking banks to provide them with certain data about customer transactions.

Apple had asked for data from banks on customers' payment card usage, including purchase volume information, data on customers' in-store purchases relative to their in-app purchase, as well as data on who the top 100 retailers were that customers were spending money with and what the average purchase amount was, Sakhrani said, according to a report by Finextra.

Technology and payments specialist Angus McFadyen of Pinsent Masons, the law firm behind Out-Law.com, said there would be a number of commercial and legal risks that banks would have to consider before deciding to accept such terms.

"Ultimately, Apple will receive a good deal of information itself through its operation of the device and app," McFadyen said. "Apple doesn’t seem to be looking to replace what banks do – the threat however seems to me to be the way that this fractures the relationship between a bank and it customer which reduces the ability of the bank to cross-sell and generate revenue from the customer. There are, of course, additional concerns about compliance with the Data Protection Act that could arise, although that would depend upon how granular the information is and specifically whether it could be classed as 'personal data'."

EU payment laws are currently in the process of being overhauled with a new Payment Services Directive (PSD2) set to be finalised later this year. McFadyen said that Apple could use data access rights under the PSD2 but, to do so, it would need to structure its services in a particular way to come within the scope of PSD2 and operate within constraints around the use of data set by PSD2.

"PSD2 does provide for certain types of operator – notably those that provide services to initiate payments or provide data aggregation services – to be given access rights to data held by banks but it isn’t clear whether Apple would look to take advantage of these rules given that to do so would cause it to become subject to financial services regulations," McFadyen said.

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