Apple just clarified alternative payments on iOS. Spoiler: Apple still takes a commission.

On December 24th of last year, the Netherlands’ competition regulator, the Authority for Consumers and Markets (ACM), ruled that Apple must allow dating apps published to the Netherlands’ App Store to transact with third-party, non-native iOS payments methods. This ruling was the result of an investigation of Apple’s market position by the ACM that commenced in 2019. Over time, the scope of the investigation narrowed to dating apps, producing the very specific directive that was published on Christmas Eve.

As a result of the Dutch ruling, Apple published documentation this past weekend that clarifies how alternative payments can be implemented for dating apps in the Netherlands’ rendition of the App Store. The primary revelations from the documentation:

  • Apple is creating two new entitlements to manage alternative payments facilitated both on the web and within apps: StoreKit External Purchase Entitlement for alternative payments within the native in-app iOS storefront, and StoreKit External Link Entitlement for managing payments on the web. Note that these entitlements are not available for use yet. Entitlements are effectively permissions that allow for certain in-app capabilities or the use of certain resources. More information on entitlements can be found here;
  • Transactions facilitated by these new entitlements will still be subject to a platform commission paid to Apple. Apple has not yet quantified that commission;
  • Developers that want to utilize either of these entitlements must create and publish a new binary that is only available in the Netherlands’ App Store. This is a wholly new requirement for the use of alternative, third-party payments processors that had not, to my knowledge, been mentioned before this documentation was published;
  • Only one of these entitlements can be used within an app (ie. either web-based payments, or alternative in-app payments, but not both).

Note that these policy changes apply very narrowly: to dating apps published to the Netherlands’ App Store. But my sense is that these changes serve as an instructive blueprint for how 1) Apple will handle future country-specific regulation related to App Store commercial policy and 2) how alternative payments will ultimately be managed on a global basis, as seems inevitable.

The question is: what is the timeline for that eventuality? Keeping track of the numerous country-specific rulings by competition regulators across the world has become cumbersome. I attempted to catalog the App Store policy changes instituted in response to various government and legal catalysts in Unpacking Apple’s recent App Store policy changes, published just four months ago, but that post quickly grew out-of-date given the frenzy of regulatory scrutiny of Apple’s commercial practices with the App Store.

The operational overhead that Apple imposes on developers with country-specific rules for alternative payments processing effectively erects an impediment to abandoning the native iTunes payments processor. The guidelines that Apple published last weekend are particular to the Netherlands, but it stands to reason that the guidelines would similarly apply in South Korea, which has also determined that mobile platform operators must allow for alternative payment methods. Managing separate app bundles for every geography in which an app developer wants to offer alternative payment options is nearly impossibly burdensome. Note that Apple has confirmed that it will allow alternative payments in South Korea, although to my knowledge, it has only released documentation pertaining to the decision in the Netherlands.

And keep in mind: Apple will still force developers to pay an as-yet-undetermined commission on sales generated through alternative payments systems. In complying with the South Korean ruling — which was targeted at Google Play’s platform practices in a bill nicknamed the Google power-abuse-prevention law but nonetheless applies to Apple’s App Store — Google has announced that it will simply reduce its commission by 4% for all transactions serviced through alternative processors. In other words: Google Play will charge a commission on transactions that it doesn’t service in South Korea.

If Apple adopts the same 4% commission reduction for alternative payments as Google has — which I assume it will, as the companies tend to move in lock-step around platform fees — then the cost-benefit calculus in the specific case of dating apps in the Netherlands veers away from using alternative payments methods. The largest dating apps by DAU primarily monetize with subscriptions, and Apple’s platform fee decreases from 30% to 15% for active subscriptions after one year. Would a Tinder or a Bumble really manage a separate, Netherlands-specific app bundle in order to earn 4% more money in the country? That seems untenable, especially when lower conversion rates for alternative payment methods are considered: the user must input their credit card number, they likely have less trust in the payment processor than for the native iTunes process, etc.

Apple issues a trenchant and pointed accounting of the risks and burdens that developers assume in abandoning the native iTunes payments process in its documentation on the subject:

It will be your responsibility to assist your users if questions or issues arise stemming from alternative payment options. Because Apple will not be directly aware of purchases made using alternative methods, Apple will not be able to assist users with refunds, payment history, subscription management, and other issues encountered when purchasing digital goods and services through these alternative purchasing methods. You will be responsible for addressing such issues with customers.

Apple is pursuing the strategy that I discussed in 2022 predictions for mobile gaming: to conjure so many obstacles and hardships along the path to implementing alternative payments that, except for those that persist out of spite, most developers reluctantly concede the effort. And on top of that, the allure and convenience of the default payments method on iOS likely obliterate the conversion math for alternative payments methods for most app developers. If Apple charges a commission on transactions serviced through alternative payments methods, how much margin can developers abandon with the various frictions inherent in asking users to fill out a credit card payment field? Keep in mind that Apple has invested heavily into establishing its brand as a vanguard of privacy protection through its App Tracking Transparency (ATT) privacy policy initiative. If consumers recognize Apple as a bulwark against privacy abuses, why would they use any payments processor other than the native iOS method, especially given the effort required?

*Edit: an earlier version of this post incorrectly asserted that Google’s platform commission would be 11% in South Korea. This has been corrected.