Apple opens up third-party app payments in Korea, cutting costs by 26%

Tim Cook at the Apple presentation, March 8, 2022

Apple

Apple said On Thursday, developers of iPhone apps distributed exclusively on the South Korean App Store can request the use of third-party payment processors instead of Apple’s in-app offerings.

But it will cost money. Apple will require apps using the new policy to report all sales to Apple on a monthly basis and pay a 26% commission on those sales. company documentation.

Apple currently collects between 15% and 30% of in-app sales and in-app purchases, depending on whether the sale is a subscription or qualifies application category with reduced fees.

New policy follows South Korean law passed last year and only affects the Korean App Store. But it could signal how Apple plans to handle third-party billing if required by regulators or courts in other countries.

Apple has said that apps that use alternative payment methods will display a pop-up that says, “This app does not support the App Store’s private and secure payment system.”

He also warned developers that using the new policy would mean they would have to deal with refunds, purchase history, subscription management and other issues on their own rather than relying on Apple.

The company said it has the right to review developer sales records as part of its terms and conditions.

“This will allow Apple to verify the accuracy of the developer’s digital transaction records as a result of the grant, ensuring that Apple has been paid the appropriate fee,” Apple’s filing says.

Third party billing was one of the main points of contention in Apple’s lawsuit with Epic Games. currently filed an appeal. Epic wanted to be able to direct users playing Fortnite on iPhone to the Epic website to purchase in-app currency. This violated Apple’s policies and bypassed Apple’s commission.

During the litigation, Apple stated that the App Store payment system provides security and that Apple’s fee includes developer tools, distribution, and marketing in addition to payment processing, and that creating an alternative system to collect developer fees would require significant effort.

“We would have to come up with an alternative way to get our commission,” the Apple CEO said. Tim Cook said during his testimony in court. “Then we would have to figure out how to keep track of what’s going on and bill and then go after the developers. It looks like this process shouldn’t exist.”

Now it seems that Apple has built its alternative system in response to Korean regulators.

Epic has supported the Korean law, and its CEO Tim Sweeney showed up at a conference in Korea last year to praise it. Apple and Google, which runs another major mobile app store, opposed the move. Google it also collect up to 26% commission from apps using native payments in Korea.

Apple is facing additional regulatory challenges that could force it to take similar action in other markets.

The European Union is currently discussing the Digital Markets Act, which would not only force Apple to allow third-party payment providers in the App Store, but could also open the door for third-party app stores on the iPhone. Apple is facing a similar situation in the Netherlands caused by the Dutch competition regulator, which is specifically related to dating apps.

Legislators in the US discussion of antitrust laws this would prevent companies like Apple from prioritizing their own services, which could force Apple to open up the iPhone to third-party app stores. Several states have also considered bills that would challenge Apple’s exclusivity of Apple’s App Store billing.

The app store and in-app purchase fees are Apple’s main source of revenue and generate higher margins than hardware sales. Apple combines App Store revenue with other services, including subscriptions and service warranties. In total, these areas generated $69 billion in sales in 2021.

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