Indian app developers feel South Korea has shown India the way. Last month, the country set a global precedent by passing a legislation which forces Google and Apple to open their app stores to alternative payment systems. For developers, this marked the much-needed falling of the proverbial walled gardens of these companies’ app store ecosystems.
At heart is a key issue: For certain apps, mostly in the domain of gaming and subscription services, Apple and Google dictate that developers use their proprietary in-app payment method. And for transactions made via the in-app payment method, Apple and Google keep a 30% commission. In legal speak, clearly a monopolistic and restrictive trade practice.
The penalty to violate this rule is suspension from both app stores, which Epic Games faced in 2020 after it dared to introduce its own in-app payment method in its popular game Fortnite.
But what Epic did in response to that suspension kicked the hornet’s nest. It asked why the two companies needed to charge such an exorbitant amount of commission, and after all, why developers were not allowed to use their own payment method in apps they developed after spending large amounts of resources.
At the same time, discontent was brewing among Indian developers. Last year, Google said it would enforce its in-app payment method by September 2021, and that led to a significant backlash from the industry who said Google was abusing its dominance.
Prominent Indian internet entrepreneurs including the likes of Paytm’s Vijay Shekhar Sharma and BharatMatrimony’s Murugavel Janakiraman spoke to the IT Ministry about the issue and as a result of the pressure, Google said it would defer the enforcement of its rules in India until March 2022.
Apple and Google also said they would charge a lower 15% commission from developers with less than $1 million in yearly revenue from app payments.
And now we have the South Korean legislation which directs Apple and Google to allow developers to have alternate payment methods within their app. In an Indian context, it would mean that developers can use UPI in their app and not pay a single penny to anyone for payments. It’s a big deal for them.
“30% commission is too steep, especially when you consider that we have already spent so much money on building the app. Why should we pay anything to Google or Apple?,” an Indian startup founder told Entrackr, requesting anonymity.
Multiple sources also told Entrackr that several developers are planning to approach the IT Ministry to bring in a law similar to South Korea’s.
“We’re looking at a model similar to South Korea where Google and Apple would have to allow alternate payment methods, third-party app stores, and non-preferential treatment of apps, among other things,” said a person with direct knowledge of the subject, on condition of anonymity.
“This is a key milestone for the mobile internet age! India should also give freedom to millions of young startups, [to] do business using their preferred payment systems,” said Paytm’s Vijay Shekhar Sharma on Twitter on South Korea’s law.
How do Google and Apple justify the 30% commission?
Google and Apple say there is a clear benefit in using their proprietary method, especially from a security and friction point of view. Besides, they say running an operating system is not free.
“Google Play provides far more than payment processing, and our service fee helps keep Android free, giving developers the tools and global platform to access billions of consumers around the world,” a Google spokesperson said in a statement.
“It’s a model that keeps device costs low for consumers and enables both platforms and developers to succeed financially. And just as it costs developers money to build an app, it costs us money to build and maintain an operating system and app store,” Google added in its statement.
Apple’s big pitch as always is privacy and security. “The Telecommunications Business Act will put users who purchase digital goods from other sources at risk of fraud, undermine their privacy protections, make it difficult to manage their purchases, and features like “Ask to Buy” and Parental Controls will become less effective,” Apple had said in a statement which they had initially released last month after South Korea’s bill was passed.
“We believe user trust in App Store purchases will decrease as a result of this [South Korea’s] proposal—leading to fewer opportunities for the over 482,000 registered developers in Korea who have earned more than KRW8.55 trillion to date with Apple,” the company said.
Antitrust pressure against Google, Apple in India
A little known non-profit in India has filed an antitrust complaint with the Competition Commission of India against Apple’s App Store practices, especially highlighting its in-app payments policies.
In November 2020, the CCI had initiated an investigation into Google’s Play Store saying that there was prima facie evidence that Google may be abusing its dominant position in India
Elsewhere, after an investigation by Japan’s antitrust regulator, Apple agreed to allow “reader” apps to include an in-app link to their website for users to either set up or manage an account. Reader apps allow users to browse previously purchased content or content subscriptions for digital magazines, newspapers, books, audio, music, and video.
And last month, Apple said developers can share purchase options with users outside of their iOS app, which essentially means that apps would be able to tell customers that they can pay for its services outside the iOS app. Before this, Apple had banned even this communication.
Alternate distribution of apps
Indian developers that Entrackr spoke to also pointed out that India needs to place strong reliance on alternate methods to distribute apps on Android and iOS. Simply, it means having third party app stores. In fact, Google itself has admitted that alternate distribution of apps is a key demand from the industry.
“Alternate distribution through multitude of players is key to ensuring a choice for in-app payments for developers,” a spokesperson for Indus App Bazaar told Entrackr. “Google currently allows OEM and their own stores on devices leaving a software-led innovation like Indus App Bazaar (IAB) at a disadvantage,” the company said.
On Google, sideloading of apps, that is, downloading them directly from the internet is allowed, but Google throws up persistent security warnings on the phone which can possibly be a detrimental factor to user experience. Apple doesn’t allow any other app store on iPhones at all.
An alternative distribution that allows free uploads and lower commissions will certainly help to redirect funds for R&D and help us grow faster, said Rajesh Padmanabhan, co-founder of NFN Labs.