South Korea Wants to Mandate Multiple Payment Systems for IAP
- Paul Thurrott
- Aug 24, 2021
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42
South Korea may have found a solution to one aspect of Google’s and Apple’s respective app store monopolies, and it’s a great idea. Simply require by law that any companies that enforce in-app payment (IAP) systems, as both do, support multiple payment systems and not just their own.
Apple and Google, naturally, oppose this proposed law. So much so that they’re calling on the US government to protect them from this incursion into their unfair business practices at a time when that very government is investigating them for the same abuses.
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Here’s what’s happening: South Korea has introduced legislation called the Telecommunications Business Act which, if passed into law, would require companies that operate app stores to accept multiple payment systems for IAPs, and not force developers to only use their own. Furthermore, the legislation would prevent app store owners from blocking developers that list their apps on other app stores. The legislation is being voted on this week.
Apple and Google had unsuccessfully petitioned South Korea to block the legislation. But now they have turned to the White House, arguing that South Korea is specifically targeting American corporations (and not because they have a stranglehold on mobile app stores, I guess). And doing so is a violation of the two countries’ trade agreement.
It’s unclear how the White House will respond given the irony of this request. Yes, US presidents have traditionally opposed international laws that undermine the power of US corporations. But multiple US regulatory bodies are right now investigating Apple and Google for antitrust abuses, and IAPs are at the core of many of these investigations. And the US isn’t alone: Regulators from around the world, including in the EU, are seeking similar curbs on these firms’ market power.
The problem for Apple and Google is obvious: Opening up IAPs to multiple payment systems isn’t just fair, it would benefit developers and consumers. And there is no valid, direct defense of their current behavior. Instead, they have to turn to side issues like joint trade agreements.
Conversation 42 comments
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bettyblue
Log in to Reply<p>"it would benefit developers and consumers"</p><p><br></p><p>How does this benefit consumers? Someone please explain this to me. I specifically LIKE the walled garden system. I like in on Apple devices and well as my Xbox. </p><p><br></p><p>When I got my Xbox Series X on launch day I finally ditched PC gaming after being a PC gamer since 1990. One of the benefits of moving to the Xbox for gaming is not having 5-7 different store apps with payment accounts in each of them to buy games. Not only that they would all auto-start by default and the launch and update storm was just nuts at times.</p><p><br></p><p>If this stuff gets forced down on Apple and Google then it needs to be forced on platforms, like Microsoft and Sony.</p>
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rm
Log in to Reply<p>I think they are just talking specifically about the payment system used by an app store, not requiring multiple app stores in this case (that is being looked into else where).</p><p><br></p><p>So, I think they are saying when you purchase something in the store, a developer can use the payment system they want (possibly the one that charges them less money). So, if Apple would be charging the developer 30%, but Samsung only charges them 10%, then they could list the app for less money and still make more money at the same time.</p>
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lvthunder
Premium MemberLog in to Reply<p>So Apple and Google will charge the developer for each download, upgrade, review, API access, developer tools, etc. The government shouldn’t force a company to run a service at a loss.</p>
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curtisspendlove
Log in to Reply<p>Yup. I’m like 99% confident at least Apple has a response in the form of “app hosting and download is included for anyone using Apple’s payment processing system.”</p>
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bettyblue
Log in to Reply<p>Wishful thinking at best.</p>
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wright_is
Premium MemberLog in to Reply<p>Theoretically , the prices you pay could be up to 25% less than in the Apple store, for example, because other payment services only take between 2% and 5%, not 30%. The question is, of course, whether the developers pass on the savings to the customer.</p><p><br></p><p>The other question is, of course, whether the developers have to offer their preferred payment system and the Apple/Google payment system?</p>
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toukale
Log in to Reply<p>This whole thing is trying to not pay the platform owners, I have news for folks, the platform owners will always get their cut, they will simply move it to a different part of the chain. The only way not to pay the platform owners is to not be on the platform, simple. </p><p><br></p><p>Tim Cook back in May on the witness stand said as much, he told the judge if something like that were to happen, they would simply find another way to monetize their ip. Unless government want to start telling companies how to charge for their products I don’t see a way out of not paying the platform owners. The way this is going, its only going to end up hurting indie developers more than anything.</p>
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Chris_Kez
Premium MemberLog in to Reply<p>I think the best case scenario for consumers here is that this enables a small number of developers to bring apps/services to the platforms that can’t be offered profitably right now because of the 15%/30% platform fees. But please do not think this is going to usher in some new golden age of low-cost apps for end users. The last decade has already seen the price of software fall precipitously for all but a handful of offerings (e.g. Office 365, Adobe CC). Apps are about as cheap as they can be right now. And as <em>toukale </em>wrote above, you can be sure that Apple and Google will find a way to extract that revenue from elsewhere; it is their job to do so. </p>
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brucebanner
Log in to Reply<p>Look, Microsoft just had a year of record profits, and immediate they raise their prices. Some form of regulation is obviously necessary.</p>
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gavinwilliams
Log in to Reply<p>> <span style="color: rgb(0, 0, 0);">Look, Microsoft just had a year of record profits, and immediate they raise their prices. Some form of regulation is obviously necessary.</span></p><p><br></p><p>All the tech companies had a year of record profits, for really obvious reasons, so that doesn’t really support any argument that we should have more regulation.</p>
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wright_is
Premium MemberLog in to Reply<p>I think you are correct. But as I said above, if it means that the Audible and Kindle apps, for example, work properly on iOS, that would be a huge win for users of those apps. Heck, I can’t even use my book credits on the Audible app on iOS, I have to go to my Android smartphone to buy a book, then go back to the iPad! (Yes, I could open a web browser tab on the iPad, log onto Audible, dig out my Android smartphone for the 2FA verification, then order something, or I could just dig out my Android smartphone, and order it directly in the app, no 2FA, no entering URLs into the browser etc., just tap on the title, tap buy now and finished.)</p><p><br></p><p>And I’m sure that Amazon aren’t paying anything near 30% transaction fees for ebook/audio book purchases on their platform.</p><p><br></p><p>Apple are their own worst enemy in this instance. These things don’t go through their store, it doesn’t cost Apple 1c (the contents is delivered directly from Amazon, in this case, it never touches Apple’s infrastructure), yet they charge 30% for the privilege of the app running on the user’s iDevice.</p><p><br></p><p>If they switched to a model, where free apps with in-app content could either pay a few cents per app/update download or pay the 30% vig to Apple, they could still cover their costs, without fleecing their users.</p>
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curtisspendlove
Log in to Reply<p>Apple is already trying to diversify service revenue for developers. All developers should be concerned if this mandates multiple payment systems. </p><p><br></p><p>Xcode Cloud builds are just the start of the developer extras they will be “offering”. </p>
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ikjadoon
Log in to Reply<p>><span style="color: rgb(0, 0, 0);">I have news for folks, the platform owners will always get their cut, they will simply move it to a different part of the chain</span></p><p><br></p><p><span style="color: rgb(0, 0, 0);">I don’t care. I’ll buy their products less often: such a simple solution. It’s not like Apple nor Google have sold anything ultra-innovative for years now. </span></p><p><br></p><p>I have no idea why you thought this was news. This is how all products work: you agree the price is worth the product. </p><p><br></p>
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bettyblue
Log in to Reply<p>"Theoretically"</p><p><br></p><p>I mean for iOS apps, I am not sure I have ever paid more that $4.99 and that is completely rare. 90% of the apps I have, are free, the rest are probably .99 cents.</p><p><br></p><p>I think this is all about big developers maximizing their profits and nothing else. Epic specifically. They are printing money with Fortnite, and are probably making….or were….making hundreds of millions off of iOS players of the game and they wanted that to be billions.</p><p><br></p><p>None of this benefits users. At best it will make users now have to deal with multiple payment systems, if not multiple app stores.</p>
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wright_is
Premium MemberLog in to Reply<p>You might not buy apps, but a lot of people do.</p><p><br></p><p>Also, recurring services, like Netflix, Spotify etc. if you pay for them through the app, Apple takes 30% of the proceeds, yet the app provider can’t charge users 30% more, if they buy through the app, or tell them that they can purchase it directly. This makes them uncompetitive, compared to the native platform services – Apple Music, Google/YouTube Music, Apple TV+ etc. – because they can’t charge more than the native apps and they have to give up 30% of their revenue to Apple or Google.</p><p><br></p><p>If they can offer an alternative payment method and charge, say $9.99 for credit card and $12.99 for ApplePay, some people will want to save that 30% by paying with their credit card, through the alternate payment service and some will find that the convenience of ApplePay outweighs the increased price.</p><p><br></p><p>Also, some apps, like Audible, Kindle, Amazon App, you can’t even buy stuff in the app in iOS/iPadOS! On my iPad, if I want a new audio/Kindle book, I have to get out my Android smartphone and go into the Audible or Kindle app, order a new book on that, then switch back to the iPad to read it! That is hardly a good advert for the simplicity of the Apple ecosystem. If they could use their existing payment infrastructure (like they can on Android), that would be a much better experience for the user.</p>
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Chris_Kez
Premium MemberLog in to Reply<p>I don’t disagree that Apple is fleecing people to make all those profits, but I would be surprised if at the end of this consumers see something like the $12.99 Apple Pay cost next to a $9.99 option for an alternative payment provider. I would expect Apple to lower the price and then simply extract the money somewhere else along the chain, because Apple is going to (rightly, I think) argue that their fee isn’t simply about payment processing (though I think the 30% level is extreme). So they will charge for use of their platform in other ways, whether it is for tools or maybe even for getting into the store. I wish Apple had been more sensible about this a few years ago, lowered their fees, been more cooperative with developers, and more fair in their dealings with competitors. </p><p><br></p>
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curtisspendlove
Log in to Reply<p><span style="color: rgb(0, 0, 0);">“The question is, of course, whether the developers pass on the savings to the customer.”</span></p><p><br></p><p><span style="color: rgb(0, 0, 0);">It is already very difficult to make much money on Apps in either ecosystem (unless you’re doing shady IAP junk). I highly doubt many developers will be passing any savings onto consumers of their apps. </span></p><p><br></p><p><span style="color: rgb(0, 0, 0);">“Thanks to lower operating costs, we can now bring far more features to our users.” — which may (but probably won’t) be true</span></p>
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ikjadoon
Log in to Reply<p>Hardworking developers making more money. </p><p><br></p><p>The horror! </p><p><br></p><p>Get a grip, folks. Developers do the hard work in the App Store, not Apple. </p>
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VancouverNinja
Premium MemberLog in to Reply<p>It can reduce the cost of the items purchased. Pretty simple. It can increase the profitability of the app creators which in turn may, and can, increase the quality of the application and customer service. It is a very good solution to the problem.</p>
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bettyblue
Log in to Reply<p>"It can reduce the cost of the items purchased"</p><p><br></p><p>It wont in 99% of the cases as most apps cost next to nothing or are free. I think the last app that I actually paid money for was Contact Mover, years ago when it was $4.99 and now I do not even use it anymore. </p><p><br></p><p>Most of my 3rd party apps are free to use with a service or something else I bought. Like Nest, Netflix, Amazon Prime, MS Office apps with my work E5 sub. Ubiquiti apps for their network gear, garage door opener, Arlo Security cameras, Duo 2F, Microsoft authenticator, etc.</p>
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Andi
Log in to Reply<p>Very simple bettyblue. Just like the Fortnite example, consumers will have the option to pay less via the dev’s chosen payment processor. If you as an Apple loyalist want to pay extra for being all in on Apple then keep paying. No one is removing anything from you. Why are you so bothered by this?</p><p><br></p><p>Apple and Google represent a duopoly that forces itself between the consumer and the dev to extract a huge chunk of any transaction. This does not happen on general purpose computers like Windows PCs or Macs. It shouldn’t happen on smartphones either seeing as they are the most important PCs in our lives. Consoles are very niche, specialized devices that do not count. Sorry…</p>
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bettyblue
Log in to Reply<p>The paying less thing is a myth. The big app devs like Epic just all of the money. I have much less of a problem if Apple/Google are forced to allow for other payment methods. That is fine if a consumer wants to deal with multiple stores have at it. I personally dont and will only buy the apps (If I actually pay at all) from company store of the device maker…iOS or Xbox.</p><p><br></p><p>I am very against the next step which is forcing Apple, Microsoft and Sony to allow apps from other apps stores. That is complete BS and should never happen.</p>
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Paul Thurrott
Premium MemberLog in to Reply<p>It is not a myth. Please stop spreading misinformation. This is well understood.</p>
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gavinwilliams
Log in to Reply<p>> <span style="color: rgb(0, 0, 0);">I am very against the next step which is forcing Apple, Microsoft and Sony to allow apps from other apps stores</span></p><p><br></p><p><span style="color: rgb(0, 0, 0);">The apps aren’t from other app stores, they are from developers. The app store is just where they are being sold. It seems OK to me that if made an app and I sold it on the Microsoft Store, that I could at some point be able to release it on the web or on the Google Store to increase my customer base. That just seems like a common sense freedom.</span></p>
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nazmuslabs
Log in to Reply<p>The walled garden systems work for applience devices. Xbox comsoles are an appliance. Smartphones have advanced enough to be categorized as “General Computing” devices, like PCs are. Walled garden approach is not well suited for this category of devices. and Allah (S.W.T.) knows best.</p>
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ikjadoon
Log in to Reply<p>><span style="color: rgb(0, 0, 0);">If this stuff gets forced down on Apple and Google then it needs to be forced on platforms, like Microsoft and Sony.</span></p><p><br></p><p>Good. Yes! Love it. </p><p><br></p><p>It should be like the Microsoft Store in Windows 11. Build your own app platforms on the OS. </p><p><br></p><p>Apple and Google have really screwed up the walled garden with no interest in removing major scam / misleading apps. I’d like to go to a better App Store. </p><p><br></p><p>Why should I be worried about those problems? Apple and Google will need figure out an agnostic, user-friendly method to allow multiple app stores. So will Sony and Microsoft. </p>
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wright_is
Premium MemberLog in to Reply<p>Given that the likes of Samsung and Huawei, among others, also have app stores, the argument that it is purely anti-American would be hard to prove.</p>
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lvthunder
Premium MemberLog in to Reply<p>But do they have those stores in South Korea?</p>
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wright_is
Premium MemberLog in to Reply<p>As Samsung is a South Korean company, I would say that is a big YES! Huawei certainly has its store in most countries – I used it on my old Huawei phone, for example, in Germany. The US only stopped them selling Google Android devices worldwide, it didn’t stop them selling smartphones with their "own" version of Android and their own store, outside of America at least.</p>
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VancouverNinja
Premium MemberLog in to Reply<p>Agreed. It is a rule that applies to all companies.</p>
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red.radar
Premium MemberLog in to Reply<p>I see this going in so many different directions.</p><p><br></p><p>Apple and Google charge a one time exorbarnt fee or require revenue sharing for submission of apps with IAP systems. Thus neutering the effort. </p><p>or..</p><p>Apple and Google are disadvantaged by third party companies that can compete without having to carry the overhead of app store infrastructure. So it destabilizes the ecosystems. </p><p>or… some place in the middle where the costs are passed along to those who use IAP systems. Developer now has to pay for submission to the app store and for data served/transited by the platform. </p><p><br></p><p>I am not certain it will go anywhere because the Tech companies are so big they have immense power to manuever. We need to get to the anti-competive behavior. I think this is a band-aide that will be maneuvered around. </p>
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bleduc
Premium MemberLog in to Reply<p>I think this will be bad for us consumers. Free apps will disappear as Apple and Google will now change developers to put apps in the stores since the stores will no longer be subsidized by the payment systems.</p>
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ikjadoon
Log in to Reply<p>Absolutely not what will happen. </p><p><br></p><p>Google and Apple will destroy their platforms if free apps become too rare / inaccessible / difficult for developers. Genuinely suicidal and they know it. </p><p><br></p><p>Next, if some prices go up bigly but the developer gets a bigger cut, I’m all for it. Good. I want to pay the developer, not trillion-dollar conglomerates. </p>
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MoopMeep
Log in to Reply<p>Would this apply to microsoft, sony and nintendo stores? Is this one of those things that even though they are all stores, the others dont count because they arent called app stores? The law sounds like it should affect all of them</p>
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JH_Radio
Premium MemberLog in to Reply<p>Has anyone stopped to consider will all of this stuff be accessible? how easy and user facing will it be to get to some other payment platform?</p><p><br></p>
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Greg Green
Log in to Reply<p>And how does this not apply to Xbox and Sony?</p><p><br></p><p>maybe the best hope for apple and google is to get Sony on their side.</p>
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Paul Thurrott
Premium MemberLog in to Reply<p>For the millionth time, the smartphone market is exponentially bigger than the console market. Phone makers sold 2 billion handsets just last year. Console makers sold, what? 20 million? 30?</p><p><br></p><p>Whatever the numbers, you start with the biggest and most egregious offenders to establish a precedent. </p>
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MoopMeep
Log in to Reply<p>Is that a valid argument?</p><p>You need to also include how much Apple/Google charge for apps compare to that of Microsoft/Sony/Nintendo.</p><p>I argue that since the apps on mobile devices sell for less (couple bucks) and the games on consoles sell for 50+ dollars, this negates the argument. In fact you could say that the console makes are taking more advantage of developers by charging 30% on a higher amount…. like 30% of 60ish dollars is somewhere around 20 dollars….. even taking 10 dollars seems like a lot to me. </p>
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ikjadoon
Log in to Reply<p>Honestly, why shouldn’t it?</p><p><br></p><p>Make your app platforms on the OS platform. </p><p><br></p><p>Use OS APIs like everyone else for deeper integration. They can integrate or refuse to integrate their platforms as much as they want. If Apple and Google want to throw a fit and hurt consumers, it’s their bottom line that’ll hurt. </p>
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ringofvoid
Log in to Reply<p>It’s currently very odd that making a purchase in-app carries such a large subsidy for Google & Apple while making the same purchase anywhere else, such as the vendor’s website doesn’t. Yes, it’s mildly more convenient to sign up for Spotify through the mobile app, but why should that gain Apple a 30% cut of the subscription for all time? You can buy a lot of in-game currencies as gift cards at the supermarket, but if you buy them in-app it’s a 30% cut to the app store due to them inserting themselves as the exclusive payment processor. Yes, it’s a cash cow for the app stores, but the value of the marginal convenience they offer comes nowhere close the the price they’re charging. </p>
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toukale
Log in to Reply<p>Why do people keep saying the only service the appstores provide is the payment processing? Apple and Google chose that because it was the easiest way to get paid for everything they provide (ex.. developer tools, bandwidth, app review, data storing, all the international legal red tapes..etc). Anyone who’s main argument is the appstores only process payments are not to be taken seriously.</p>
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ikjadoon
Log in to Reply<p>lol, if you think that Apple and Google have any serious incentive to remove scams / misleading paid apps. </p><p><br></p><p>If Apple and Google want to kill their own platforms with poor third-party App Store integration, go right ahead. </p><p><br></p><p>It’s their own bottom line. Every major regulatory body is targeting them—it’s game over, especially outside the US. </p><p> </p><p>They’ve hurt / taken advantage of consumers far too many times and if you don’t see that, I think you’re the one that should not be taken seriously. </p><p><br></p>