Why the EU Is Challenging Apple and Its Monopoly

When you use Apple Pay, you're actually using an NFC chip to perform that payment -- and Apple (AAPL -0.35%) is the only app or company that can access that chip. In this Motley Fool Live segment from "The Virtual Opportunities Show," recorded on May 10, Fool.com contributors Travis Hoium and Demitri Kalogeropoulos examine the pressure that the EU is putting on Apple to open up some of this technology. 

Travis Hoium: The EU accused Apple of, I'm just going to be this directly, breaking competition laws over contactless payments. This has to do with Apple's near-field communication or NFC chip in iPhones. When you use Apple Pay, you're actually using an NFC chip to perform that payment. Apple basically is the only app or company that can access that chip. So what the EU is contending is that basically, that should be something that anybody can develop for. There should be an API that Square or PayPal or Toast or, whatever can access that chip to be able to use different payment methods, you're not locked into Apple Pay. Apple's push-back to that would be, well, now if we're controlling Apple Pay, we can control when this chip is on, what the security is around it. Instead of you accidentally hitting a button and leaving PayPal up on your phone and then somebody walking by you and performing a payment while your phone's in your pocket we can control that entire process. I don't know that that would be possible specifically, but I think they're thinking about it from a security standpoint the EU is thinking about it from a competition standpoint, are you allowing a competitive environment in this contactless payment space?

Because Apple has such a big market share and it's basically a duopoly between them and Android where it's smartphones. So do you basically lock all of these other payment companies out of the market and you're just spreading your tentacles further and further and further. This is what tech companies do. Is they have a core product that they can just add to, and add to, and add to. Where do you draw that line? The EU is saying that this is going to be one thing that they are going to push back on and say that Apple, you need to open up the NFC chip in some way, shape, or form. Apple obviously, I think is going to push back pretty hard on that. But I think that's going to be an interesting thing to see play out because these are the core devices of everything that we do digitally and maybe it will be good for Apple to allow a little bit more innovation on something like Apple Pay. But I see the downside risk there as well.

Demitri Kalogeropoulos: That is interesting, I was just thinking about like for example, the face ID technology. I'm pretty sure Apple doesn't allow any other third-party developers or anything to get anywhere near that, for example, that's on lock-down, I guess too, that's another one of those situations.

Travis Hoium: That's always been a selling point for Apple too. Theoretically, it's more secure than an Android device, which is really open. That was always the thing with PCs versus max in the 80s and 90s was that it was more secure, there wasn't many bugs and viruses. It'll be interesting to see what happens with this. The European Union is typically the place where some of these regulatory challenges come first, but the US is starting to get more involved in this as well and as a company like Apple, I mean, they're getting push-back on the App Store and the 30 percent cut that they take on the App Store saying maybe that's too much. But there's never a perfect response. What do we do, are we going to have 20 app stores on our phones and you can download anything you want. I don't know that that's a better solution either, but as Apple probably muscling around the market a little bit, probably. So I don't know what the right balance is there between those two things.