(In final par, ANZ is Australia's third-largest bank by market value, not fourth)
SYDNEY, Nov 29 (Reuters) - Three of Australia's four biggest banks will be barred from collectively bargaining with Apple Inc AAPL.O in relation to its mobile digital payments system, under a draft decision released by the antitrust regulator on Tuesday.
The Australian Competition and Consumer Commission said letting banks collectively offer their own integrated digital wallets in Apple iPhones, in competition with Apple's Apple Pay system, would reduce each bank's ability to negotiate with the U.S. firm.
"While the ACCC accepts that the opportunity for the banks to collectively negotiate and boycott would place them in a better bargaining position with Apple, the benefits are currently uncertain and may be limited," commission chairman Rod Sims said in a statement.
The decision is a setback for the banks' hopes to bypass Apple's in-house payments system and roll out their own versions free of competition from the Silicon Valley giant, which has the biggest smartphone market share in Australia.
It also sets a precedent which may solidify Apple's dominance of the digital wallet system globally, since the Australian banks had mounted the first challenge to it.
Apple Pay allows users to register credit cards on devices such as iPhones, and pay for goods and services by swiping the devices over contactless payment terminals. Apple charges card providers for transactions via the service, which it introduced to Australia last year.
Commonwealth Bank of Australia CBA.AX , Westpac Banking Corp WBC.AX , National Australia Bank Ltd NAB.AX and smaller Bendigo and Adelaide Bank Ltd BEN.AX , which jointly have two-thirds of the Australian credit card market, argued that letting Apple restrict use of mobile wallets was anti-competitive.
Apple argued that it had not granted access to its digital wallet technology to third-parties anywhere in the world because it would undermine customers' privacy and data security.
A representative for the banks behind the application was not immediately available for comment.
The ACCC said it would consult further and give a final decision in March 2017.
Australia and New Zealand Banking Group Ltd ANZ.AX , Australia's third biggest bank by market capitalisation, has its own digital wallet agreement with Apple.