New South Korean Law Mandates Alternative App Store Payment Options
South Korea’s National Assembly has voted to amend its Telecommunications Business Act to force Apple and Google to let developers offer alternative payment methods instead of requiring that they use the built-in payment systems. The new legislation also prevents Apple and Google from unreasonably delaying approval of apps or removing apps from their respective stores. Companies that don’t comply may be fined up to 3% of their South Korean revenue.
Unsurprisingly, Apple isn’t happy and claims the change will increase the risk of fraud. Now we have an opportunity to see if Apple’s claim proves to be true or not. The South Korean law may also have other repercussions, such as encouraging other countries to pass similar legislation.
I wonder at this stage whether opening up payment methods will have a significant impact on either Apple or Google’s business model.
I’m not sure I would leave the ecosystem even to save a few bucks. I like that I can manage my in-app subscriptions through one central place - my Apple account.
I don’t like to have to chase down a developer for a refund or to cancel a recurring charge. I’m sure that there are many users who wouldn’t bother to change how they do things.
If developers discount to pull users away from the in-app option, then they risk defeating the advantage of alternative payment methods.
On the other hand, the optics of opening up can only benefit Apple and Google.
I think this is going to primarily impact the big players.
A small developer probably would prefer the convenience of using Apple as their payment processor. Does anyone know how Apple’s fees compare with third-party payment processors?
The big companies, which already have their own payment systems in place (e.g. Netflix, EA, Nintendo), on the other hand, really don’t want to use Apple. I’m sure it costs them far less to use the payment processing system they already use on other platforms, compared with Apple’s fees.
For customers (like you and me), if the company makes the purchasing experience too painful, they will find their customers choosing to not make those purchases. They’ll either choose to buy via Apple (if the option isn’t removed from the app), choose to stick with a free tier of service (if one exists) or they’ll switch to another app.
Like so many other things, those companies that get it right will benefit and those that mess it up will upset their customers and will suffer. And some companies that get it right will start selling their system as a library that others can use in their apps.
In the long run, it will probably all work out fine, but there will be short-term pain during the transition. Pain that, in hindsight, should have been suffered back at the dawn of the App Store, when the customer based was much smaller.
It will be very interesting to see if this has any influence on the 30% commission Apple and Google are both taking in SK right now.
On the Mac this is the system we have had ever since the MAS came about and I’m perfectly fine with the way it works — we have ample choices (including restricting yourself to the security provided by MAS curation). So right now I fail to understand why some observers seem to be reacting to this news like their hair’s on fire.
Gruber has some additional thoughts at Daring Fireball
The chances are that it will, and Korea will be something of a litmus test. Apple and Google may have lost this battle, but they have not lost the war. But let’s wait and see if purchasers who download apps outside of the App Store end up being victims of scams, credit card fraud, security problems, getting stuck with apps that crash or bog down their devices, etc.
BTW, Android has a much larger market share in Korea than Apple…over 50% more. Samsung’s proprietary OS is a minuscule less than 1%:
And Samsung has its own Galaxy App Store, and they charge developers 30%:
There doesn’t seem to be any mention in the press of Samsung being under fire in Korea for its 30% developer fee.
And more from Gruber: