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Apple will let developers tell users about payment methods outside of the app, but there’s a catch

The proposed changes come at a time when Apple and Google are facing criticism for their app store policies from developers, regulatory bodies, and lawmakers in various countries. 

Apple on August 27 proposed a number of changes to its App Store policy and agreed to pay $100 million in a bid to settle a 2019 class-action lawsuit filed by US app developers. The lawsuit argued that Apple abuses its monopoly power by charging high commissions, setting pricing mandates, and preventing developers from distributing apps outside the official App Store.

The changes come at a time when both Apple and Google app stores are facing increased regulatory scrutiny from countries around the world, including India. The US and South Korea are currently considering legislation to curb the dominance of these two platforms and Apple also awaits a verdict in the much-publicised lawsuit brought by Epic Games.

What’s the biggest change to App Store announced by Apple?

Developers can let users know about payment methods available outside the in-app billing system: 

“To give developers even more flexibility to reach their customers, Apple is also clarifying that developers can use communications, such as email, to share information about payment methods outside of their iOS app. As always, developers will not pay Apple a commission on any purchases taking place outside of their app or the App Store. Users must consent to the communication and have the right to opt out.” – Apple

What’s Apple’s current policy? Apple’s current App Store guidelines state that apps cannot “encourage users to use a purchasing method other than in-app purchase” and “developers cannot use information obtained within the app to target individual users outside of the app to use purchasing methods other than in-app purchase (such as sending an individual user an email about other purchasing methods after that individual signs up for an account within the app).”

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What is the issue with the current policy? Developers prefer users paying through alternate payment methods, such as through their own website, because the in-app billing system requires paying Apple a 30 percent commission. But the current policy severely limits the ability of developers to communicate this with their users. This is, in fact, one of the main arguments made by Epic Games in its lawsuit against Apple.

How do platforms like Spotify and Netflix navigate the current policy? Spotify and Netflix, two of the most downloaded apps, currently do not have an option for users to subscribe through their apps. Users will have to pay and subscribe on the websites of these platforms. More importantly, the apps do not display any details on how users can subscribe because this would violate the App Store policy.

  • Spotify: Spotify points out the inconvenience this causes in a dedicated website calling out Apple’s unfair app store practices: “If users want to upgrade from our Free service to Premium, great, we’d love to have them! But Apple bars us from offering that option in our app, instead, forcing users to take multiple steps of going to a browser or desktop. Some of our users don’t even have a desktop. And to top it off, we can’t even tell them that or point them in the right direction. You have to figure it out all on your own.”
  • Netflix: Netflix initially used to offer in-app sign-ups but then stopped offering this in 2018. Newly discovered emails showcase how Apple went out of its way to get Netflix to start offering in-app purchases again, but Netflix did not relent.

Screenshots from Netflix and Spotify app when trying to sign-up or upgrade

What’s the catch with the proposed change?

Does not allow in-app prompts and external linking: The proposed change does not say that developers will be allowed to use in-app prompts to share information about or directly link to external payment methods. The current guidelines clearly state that “Apps and their metadata may not include buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase.” The proposed change merely states that developers can use communications, such as email. This does not address the underlying concern because developers are still restricted in how they can promote external payment methods. As such, it appears that platforms like Netflix and Spotify will not be able to change the prompts shared above even if the new guidelines go into effect.

Apple’s consent clause makes it harder as well: In practice, the new change allows developers to communicate alternate payment methods with users through means like email, message, or call, but they can only do so after receiving consent from the user for this. Receiving this consent from users is not going to be as easy as just notifying the customer on the app.

Where does Google stand?

Google Play store guidelines also prohibit apps from leading users to other payment methods via in-app promotions, web views, buttons, links, messaging, advertisements, user interface flows including account creation or sign-up flows, or other calls to action. The app listing should also not lead users to external payments. However, Google does not say anything about communicating alternate payment methods with users outside of the app such as emails and messages. As such it appears that developers can use email information provided by users on the app to contact them directly.

What are the other changes to App Store announced by Apple?

  • Small Developer Assistance Fund: Apple will establish a $100 million fund to assist small US developers. Developers eligible to claim benefits from this fund are those who have earned $1 million or less through the US storefront between June 4, 2015, and April 26, 2021. Apple said that this encompassed 99 percent of developers in the US. Hagens Berman, the law firm representing the US app developers in the lawsuit, said that “developers can claim sums from the fund ranging between minimums of $250 to $30,000, based on their historic participation in the App Store ecosystem.”
  • 15 percent reduced commission will continue to exist for at least the next three years: Apple’s standard commission rate is 30 percent but last year it announced the Small Business Program that reduced commissions to 15 percent for developers that make less than $1 million per year. Now the company says that it will maintain this program for at least the next three years.
  • New transparency report on App Store: Apple announced that it will “create an annual transparency report based on that data, which will share meaningful statistics about the app review process, including the number of apps rejected for different reasons, the number of customer and developer accounts deactivated, objective data regarding search queries and results, and the number of apps removed from the App Store.”
  • More price points will be available: Apple said that it will “expand the number of price points available to developers for subscriptions, in-app purchases, and paid apps from fewer than 100 to more than 500.” Developers had complained that the fixed price points offered by Apple were not flexible enough.
  • Search results will be based on objective characteristics: Apple said that search results will continue to be based on objective characteristics like downloads, star ratings, text relevance, and user behavior signals for at least the next three years. Developers have accused Apple of manipulating these results in favor of its own apps or its business partners.
  • More content on the appeal process will be added to App Review website: In addition to maintaining the option for developers to appeal the rejection of an app, Apple said that it will add content to the App Review website to help developers understand how the appeals process works.

“We truly are proud that a case brought by two developers, standing in the shoes of tens of thousands of U.S. iOS developers, could help to bring about so much important change.” – Steve Berman, lawyer for the plaintiffs in the suit

What are the new US and South Korea bills proposing?

US: On August 11, US lawmakers introduced a landmark new bill titled Open App Markets Act that targets Apple App Store and Google Play store. The bill proposes the following:

  • Operating systems must allow third-party app stores
  • Developers can choose their choice of in-app payment system
  • Pricing for various app stores or in-app payment systems can be determined by developers
  • Developers can freely communicate pricing offers with users
  • Google and Apple cannot use non-public data to build competing apps
  • No self-preferencing in app stores
  • Third-party developers must be provided the same access to developer tools

South Korea: Separately, South Korea is contemplating an amendment to its Telecommunications Business Act that will bar Google and Apple from requiring developers to use their payment systems, effectively stopping Google and Apple from charging commissions on in-app purchases. The bill, dubbed as the “anti-Google law,” also prohibits blocking developers from listing their products on other app stores. The bill has been approved by a parliamentary committee and is awaiting a final vote. If passed, the law will be the first such curb on app stores by a major economy.

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