In-app payments: app store and google play commissions, and external billing options

App store control over payments

Mobile app distribution platforms, primarily the Google Play Store and Apple App Store, exert significant control over transactions occurring within the apps they host. This model, established since the inception of mobile ecosystems, implies that any digital good or service purchased through the app itself must use the store's integrated payment systems. Developers benefit from distribution infrastructure, store visibility, and the platforms' management of billing and potential chargebacks, but in return, they must comply with their monetization policies.

App Store and Google Play commissions

Both platforms apply a commission system on in-app purchases. Traditionally, the standard fee has been 30% of the transaction value. However, this percentage is not universal, and there are important exceptions:

Commissions for subscriptions

For subscription-based services, commissions typically follow a tiered model. Apple, for example, applies a 30% commission during the first year of an active subscription. From the second consecutive year of the same subscriber, this commission is reduced to 15%. Google Play applies a similar policy, where the commission also drops to 15% after an initial period for recurring subscriptions. This structure aims to incentivize long-term user retention. More information on the tax management of these revenues can be found in facturar suscripciones en españa: iva, renovaciones y verifactu.

The small business program

In an effort to support developers with lower business volumes, both Apple and Google have implemented reduced commission programs. Apple's App Store Small Business Program and Google Play's 15% fee policy state that developers generating up to 1 million US dollars (or equivalent) in annual revenue through the store benefit from a 15% commission instead of the standard 30%. Once revenues exceed this threshold in a calendar year, the standard 30% commission applies for the remainder of that year and the next.

Exceptions and services not subject to commission

It is important to note that not all types of transactions are subject to store commissions. Generally, platforms do not charge commissions for the sale of:

• Physical goods and services (such as purchasing a product in an e-commerce store or booking a taxi).
• Services consumed outside the app (such as buying tickets for an event or booking accommodation).
• Donations, provided they are processed via a website and not as an in-app purchase.

In these cases, developers can integrate their own payment gateway directly into the app without incurring store commissions, as long as the transaction is finalized on an external system.

Off-app billing options and alternative payment systems

Traditionally, store policies explicitly prohibited any form of "steering" users outside the app to make payments, or offering alternative payment systems within the app. However, the regulatory landscape, especially in the European Union with the Digital Markets Act (DMA), has driven significant changes. To delve deeper into in-app payments, consult our news on in-app payments section.

Apple's policies

Apple has partially relaxed its rules, allowing developers in some markets and under certain conditions to:

• Inform users about the existence of payment methods outside the App Store, for example, in an email or on their website.
• Include a link to an external website for users to manage or acquire already purchased digital content, such as subscriptions or downloadable content, but not to make new purchases directly if the same content is offered in-app. The sale of digital content within the app via an external payment system generally remains restricted.

Google Play's policies

Google has adopted a more open approach with its alternative billing program (User Choice Billing), available in specific markets, including the European Economic Area (EEA). This program allows developers to offer users a choice of a third-party billing system alongside Google Play's billing system. While it offers more flexibility, using alternative payment systems within the app still involves paying a commission to Google, albeit reduced by a few percentage points compared to the standard rate (e.g., 26% instead of 30%, or 11% instead of 15% for subscriptions after the first year or for small businesses).

Implications of choosing the payment system

The decision to use store billing or explore alternatives has several implications for the developer:

• Responsibility and security: By opting for an external payment system, the developer assumes full responsibility for transaction security, PCI DSS compliance, and the management of sensitive card data. This contrasts with the store model, where they handle these aspects. It is crucial to understand what data should not be stored, as explained in signed webhooks and card data you should not store.
• Subscription and chargeback management: With proprietary payment systems, managing the lifecycle of a subscription (renewals, cancellations) and resolving chargebacks falls directly on the developer, requiring robust systems and processes.
• User experience: Integrating external payments can add steps or friction to the purchase process if not implemented seamlessly.
• Flexibility and costs: External payment systems offer greater flexibility in choosing gateways, currencies, and pricing models, and potentially the ability to reduce costs if gateway commissions are lower than store fees.

Practical conclusion for developers

The choice of monetization model and payment system in mobile applications is a strategic decision that must weigh several factors. App store commissions are a significant cost, but they offer a consolidated ecosystem and simplified payment management. Growing regulatory pressures are opening new avenues to offer alternative payment options, but these come with additional responsibilities regarding security, regulatory compliance, and operational management. It is fundamental for developers to understand the specific regulations of each region and platform, as well as the costs and benefits of each option, to design an effective and legally compliant monetization strategy. Staying informed about constant changes in these policies is essential to avoid penalties and optimize revenue.