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Alternative payments in the App Store: All you need to know

Murat Menzilci

January 18, 2024

5 min read

Content

Alt payment

Apple recently updated its developer guidelines, allowing U.S. based developers to point users to alternative payment options outside of the App Store. This shift comes in the wake of the U.S. Supreme Court’s decision not to hear appeals from Apple and Epic Games. Let’s have a quick look at how this has been translated into action.

The commission is still there

The company stated on its support page that developers directing users to alternative digital purchase options would still owe Apple a 27% commission. This rate drops to 12% for members of Apple’s Small Business Program and for auto-renewing subscriptions entering their second year.

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In essence, Apple is offering a modest 3 percentage point discount for using alternative payment methods. However, this might not be significantly beneficial as developers still incur fees from other payment processors.

Apple’s approach in other countries

It’s interesting to note that Apple has a few exceptions for a couple of countries that have already been effective for a while. They are a great example of how Apple makes concessions but still comes out as a winner.

Dutch Dating App Developers: Following a court order, Dutch dating app developers are no longer bound to use Apple’s in-app purchase system. However, for those opting for third-party payment systems, Apple charges a 27% commission.

South Korea’s Case: In 2022, Apple allowed South Korean developers to use third-party payment systems, requiring them to submit a separate app version for the South Korean App Store. The commission here is set at 26%, slightly lower than in the Dutch case.

The reality of implementing Apple’s new rules

Setting up external purchases under Apple’s new rules presents significant challenges. Developers are limited to one link for these purchases, which cannot be on the main monetization screen. The combined costs of third-party transaction fees and Apple’s commission could negate any potential savings.

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Apple’s example screen shows a link leading to a purchase from a website.

Moreover, the user experience could suffer due to additional steps like facing warning screens, logging in again, and entering credit card details manually. These hurdles might lead to lower conversion rates for external purchases.

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Apple’s modal screen shows a message to users indicating that they are about to use an alternative payment method.

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More pitfalls for developers

Apple insists that its payment system remains the most convenient, safe, and secure option for in-app purchases. The company warns that alternative payment methods will exclude features like Family Sharing and leave developers responsible for customer support regarding refunds and subscription management. Developers must apply for permission to include external payment links in their apps and are required to submit transaction reports within 15 days after each month’s end.

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Apple has laid out specific interface guidelines for showing links to web-based purchases. These guidelines include texts indicating that certain features may not be available with third-party payment options. Despite these guidelines, Apple acknowledges the difficulty in collecting commissions due to the App Store’s vast scale, as reported by 9to5Mac.

Broader regulatory scrutiny

Apple isn’t the only company facing regulatory scrutiny over app distribution. Google was found guilty of anticompetitive behavior in a case with Epic Games, with a judge yet to decide the next steps. Additionally, Google settled a case for $700 million with the U.S. attorney general over Play Store monopoly claims and has made changes to its Play Store model.

As for Apple, the recent ruling by the Supreme Court is unlikely to mark the conclusion of legal challenges to Apple’s dominance over the iOS App Store. Tim Sweeney, CEO of Epic Games, has voiced discontent with the Supreme Court’s decision and signaled a determination to persist in their battle against what they view as Apple’s anticompetitive practices. 

Conclusion

For app developers, it’s crucial to weigh the effort against potential benefits. Currently, it looks like despite losing in court, Apple still sits on top of the chain leaving developers not much of a choice. However, alternative strategies like web2app technologies or integrating tools like Stripe with platforms like Adapty may offer more viable solutions in the evolving digital marketplace.

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