External iOS payments for in-app purchases now live: 3 big problems
External iOS payments for in-app goods are now available in the U.S., thanks to the 2021 Epic Games lawsuit against Apple. But don’t expect big savings. In fact, expect everything to cost more, while conversion rates go down, and users/players/customers get frustrated.
In September of 2021, Epic won a part of its lawsuit against Apple when U.S. District Judge Yvonne Gonzalez Rogers ruled that Apple must allow developers to provide third-party payment options in apps. Until yesterday, that judgment was tied up in further legal wranglings. But as of today, Apple has complied with the court’s ruling and is opening up iOS for external payment providers.
Sounds good for developers, right?
Why? Three reasons:
- The massive drop-off in conversions you’ll see
- The massive amount of extra work you’ll have to do
- The massive commission Apple will still charge you to go through all the hassle and pain of setting up your own app payments system
External iOS payments: almost guaranteed lower conversions
Look at the screen you’ll have to show users/players/customers before they leave to send you money on your own website or payment provider:
If you thought the ATT wording was scary and fear-mongering, here’s its best friend. “You’re about to go to an external website,” the massive bold text blares. “Apple is not responsible for the privacy or security of purchases made on the web.”
Every time you want to allow someone to make a purchase, your app must call the StoreKit External Purchase Link API. Then it will surface a system disclosure sheet like the one above, which tells your user that their App Store payment method won’t be available, refund requests won’t be handled by Apple, and Apple can’t verify any pricing or promos.
And that’s just the beginning.
Once someone clicks through that (and notice neither of the 2 options — Continue or Cancel — are prioritized or highlighted as the default) then they have to go through the hassle of setting up a credit card and account with you and/or your payment provider.
Conversion rate optimization experts know: every extra hoop you ask a customer to jump through drops your conversion rate. Setting up an account, providing personal information like an address and credit card number … all of this takes time, is tedious, and is easy to mess up on a mobile device. Worse, if you’re not a major known brand like Rovio or Uber or Lyft or LinkedIn, people are likely to be wary of trusting you and your level of security with all their data.
It’s not hard to imagine conversion rates dropping so much you lose more than the 30% you’re paying Apple for in-app purchases now: a 3-second process that most iOS users do without any problem.
External iOS payments: so much extra work
Does paying 30% or less of your revenue to Apple or Google kinda suck?
You know what sucks more?
Doing all the work to handle payments yourself.
First there’s setting up the systems, finding a payment processor, maybe negotiating on fees if you’re big enough to have some clout. Then there’s record-keeping and accounting to manage. Perhaps worst of all, there’s refunds and customer service. And while you can’t really satisfy customers when they buy via IAPs — because essentially they are Apple’s customers — when they buy from you, you need to have systems, processes, and people to handle complaints, concerns, failed deliveries, or refunds.
And you thought you were a mobile app developer?
Now you’re running a customer service division.
But that’s not all. To set up external iOS payments for in-app purchases, you have a lot of work to do with Apple and your app:
- Request a StoreKit External Purchase Link Entitlement from Apple
- Configure and enable the entitlement in your app
- Change your development and publishing processes, most likely (because this is US-only right now, so you’re likely doing more work to create a custom app bundle)
- Tell Apple where your external purchase will happen (and if that changes, you’ll have to resubmit your app with a new link)
- Check whether a user can buy things by calling the canMakePayments API every time before sending a user to your payments page
- Follow no fewer than 9 requirements when actually implementing the link out, including 1 that limits how often and where you can show the link
- Follow Apple’s design guidelines
It might not be rocket science, but it’s not exactly easy either.
External iOS payments: subject to a massive 27% commission
After all that work, you might be tempted to crack a beer and yell FREEDOM!
But you’d be fooling yourself, because Apple’s pound of flesh is still getting collected.
“Apple’s commission will be 27% on proceeds you earn from sales (“transactions“) to the user for digital goods or services on your website after a link out (i.e., they tap “Continue” on the system disclosure sheet), provided that the sale was initiated within seven days and the digital goods or services can be used in an app,” Apple says. “If you’re a participant in the Small Business Program, or if the transaction is an auto-renewal in the second year or later of an auto-renewing subscription, the commission will be 12%.”
And if it’s a subscription, “each subsequent auto-renewal after the subscription is initiated is also a transaction.”
So you’re doing all the work, you’re paying the processing fee, you’re supplying the labor and infrastructure for customer support, and you’re getting a tiny discount on Apple-facilitated in-app purchases.
In other words, at this commission rate, external iOS payments are a non-starter.
But it gets better. As 9to5Mac reports, Apple reserves the right to audit you.
“To help ensure collection of Apple’s commission, developers are required to provide a periodic accounting of qualifying out-of-app purchases, and Apple has a right to audit developers’ accounting to ensure compliance with their commission obligations and to charge interest and offset payments.”
But you could try to play fast and loose, and Apple admits its options are limited:
“Although developers are contractually obligated to pay the commission, as a practical matter, with hundreds of thousands of developers with apps on the U.S. storefronts for the iOS and iPadOS App Stores, collection and enforcement will be exceedingly difficult and, in many cases, impossible.”
I’d advise against that.
It’ll likely work until Apple sets up something to monitor calls to the APIs that facilitate external iOS payments and start joining that data with commission data to look for high volume API calls not associated with significant commission revenue.
And then it’ll all blow up in your face.
So what’s an app developer or publisher to do?
First of all, with the EU’s Digital Markets Act, Apple’s going to have to provide something similar in Europe. Other nations are looking at similar legislation. So there might be something better coming.
Secondly, replacing a 30% commission with a 27% commission while doing less work is clearly abiding by the letter of the law while thumbing your nose at the spirit of the legal ruling. Somebody — maybe Epic, unless their legal war chest is exhausted — will challenge this at some point.
Apple will likely have to adjust this in the future, at which point publishers can take another look at their in-app purchase options and reassess.
Update January 18: Epic founder and CEO Tim Sweeney says Epic will challenge this:
“Epic will contest Apple’s bad-faith compliance plan in District Court.”
So: the court battles will continue!