Paddle Plans to Launch Alternative In-App Purchase System on iOS That Circumvents Apple's Fees

[MacRumors]

In response to the Epic Games vs. Apple ruling last month, payments platform Paddle today announced that it plans to launch an alternative in-app payment system for iOS that replaces Apple's in-app purchase mechanism.

In an emailed press release, Paddle described its payment system as a "true like-for-like, drop-in replacement" for Apple's in-app purchase mechanism, allowing developers to collect payments from customers without having to pay Apple a 15-30% commission on sales. Paddle said it will have a "highly competitive fee structure" with a 10% fee for transactions under $10 and a 5% plus $0.50 fee on transactions over $10.

In addition to lower fees, Paddle said benefits of its payment system will include access to customer data such as email addresses for communicating product news and offers, flexible pricing and subscription options, direct customer service, and more.

On its website, Paddle shared a video demonstration of an app with an "Upgrade Now" button that leads to Paddle's payment system on the web. Users are then presented with the option to pay via Apple Pay, PayPal, or a credit card directly.

Paddle said developers can register their interest in its in-app payment system starting today, and it said the service will go live December 7, 2021, a date that it says is in line with the terms of the Epic Games vs. Apple ruling.

The exact wording of U.S. District Judge Yvonne Gonzalez Rogers' ruling said that Apple can no longer prohibit developers from "including in their apps and their metadata buttons, external links, or other calls to action that direct customers to purchasing mechanisms, in addition to In-App Purchasing." The judge required Apple to adhere to the permanent injunction within 90 days of her ruling, which was issued September 10.

Paddle certainly has bold intentions here based on its interpretation of Rogers' ruling, but it seems unlikely that Apple will allow apps to offer alternative payment systems that circumvent Apple's in-app purchase mechanism and/or fees. We've reached out to Apple for comment, and we'll update this story if we hear back.

Apple has previously stated that alternative payment systems in apps could expose users to privacy and security risks, including fraud.

Founded in 2012, Paddle says more than 2,000 software businesses rely on its platform for sales in over 200 markets globally. Paddle advertises its customers as including Setapp/MacPaw, Scrivener, AdGuard, Readdle, and others.

Article Link: Paddle Plans to Launch Alternative In-App Purchase System on iOS That Circumvents Apple's Fees

 

[Hammerd]

Wait and see!!

 

[djcerla]

Developers will be required to pay their 15-30% cut anyways, so what’s the point? Nowhere in the Epic vs Apple ruling the judge stated devs can get the App Store services for free.

Also: 10% does not look very competitive vs. 15% most devs pay to Apple.

 

[Havoc035]

This solution assumes Apple will allow for different payment mechanisms only. To me it seems more likely that always offering Apple's IAP will be required.

 

[Eddy Munn]

Developers will be required to pay their 15-30% cut anyways, so what’s the point? Nowhere in the Epic vs Apple ruling the judge stated devs can get the App Store services for free.

Also: 10% does not look very competitive vs. 15% most devs pay to Apple.

I'm sorry, but how is 10% vs 15-30% not competitive?

 

[ersan191]

I’m sure a thousand companies are, most of them more well established than “Paddle”

 

[masteroflondon]

"In addition to lower fees, Paddle said benefits of its payment system will include access to customer data"

And there's the privacy Apple warned about. Imagine Visa giving your address to all the shops you buy from.

 

[ashdelacroix]

This may benefit developers, but it won't benefit users. Users want to make secure, seamless, low-friction and trusted payments for apps, and not bother navigating other payment gateways. This is not a user-led rebellion. This is just about developers not wanting to pay for the privilege of selling on the world's most successful storefront. That said, I've always thought Apple's fees too high, but these have reduced for many developers now and are competitive with former traditional ways to sell software, which often commanded high fees, especially in the box-software days. Paddle could undercut Apple, sure, but users will expect to pay via Apple, and developers should be mindful of that. And anyone arguing that developers could pass on their savings to users: developers are going to use Paddle to cut their fees, but then pass their savings on to users by cutting the cost of their app? So developers would have no benefit in using Paddle?

 

[Puonti]

I'm sorry, but how is 10% vs 15-30% not competitive?

The poster you were quoting might have other, further qualifications for their comment, but here's how I'm looking at it:

Consider that per (my understanding of) the ruling developers will be allowed to offer non-Apple payment options.

Consider also that per (my understanding of) the ruling Apple is allowed to continue to charge developers fees for services that the 15/30% cut used to cover.

Consider a hypothetical where Apple splits that cut so that they charge 5% if you use Apple's IAP system for payment handling (but you can use other payment handling systems, such as Paddle's), but regardless you still need to pay 10/25% to cover everything else that Apple is charging you for.

Going 100% Apple systems you'd pay 15/30%

Going with Paddle for payment processing you'd pay 20/35% (10% to Paddle, 10/25% to Apple)

As said this is hypothetical of course, since we don't know how Apple will charge developers under this ruling, going forward. But it's an example of how things might go.

 

[Da_Hood]

Hmmm…. why would I agree to a payment facilitator handing out my email address?

 

[SqB]

Yeah, as a user I would likely just not install or delete any apps that required me to jump through some third party hoops like PayPal or this. Then whatever alternative developers who set up basically the same app with IAP will get my business. No cost saving will be passed to the customer here. Privacy will be violated. My email is already full of enough junk, thank you.

If I wanted this kind of thing I would have bought an Android phone.

 

[Roadster Lewis]

Hmmm…. why would I agree to a payment facilitator handing out my email address?

I would not use it out of principle. I would rather not purchase an app that use this sort of payment system.
It is going to degrade the user experience for most users, have minimal impact for developers, but has probably earned lawyers/regulators a load of money in fees/lobbying etc.

 

[R4z3r]

Under no circumstance will I use this by choice. Sure, developers want more money but as a customer I want to trust that I’m safe. On the web, we avoid many services because of the questionable risk of online payment and this simply extends it to iOS.

 

[Paul Shields]

Greedy parasite microtransaction data thieves. I hope Apple enforce a warning message that pops up every time you try to pay outside. And surely the price the user pays will be lower this way? Like when Epic pulled their failed stunt and got merced.

 

[IGI2]

The poster you were quoting might have other, further qualifications for their comment, but here's how I'm looking at it:

Consider that per (my understanding of) the ruling developers will be allowed to offer non-Apple payment options.

Consider also that per (my understanding of) the ruling Apple is allowed to continue to charge developers fees for services that the 15/30% cut used to cover.

Consider a hypothetical where Apple splits that cut so that they charge 5% if you use Apple's IAP system for payment handling (but you can use other payment handling systems, such as Paddle's), but regardless you still need to pay 10/25% to cover everything else that Apple is charging you for.

Going 100% Apple systems you'd pay 15/30%

Going with Paddle for payment processing you'd pay 20/35% (10% to Paddle, 10/25% to Apple)

As said this is hypothetical of course, since we don't know how Apple will charge developers under this ruling, going forward. But it's an example of how things might go.

or maybe, the whole alternative payment system cannot be embedded inside the app (and its code) and the apps will have to link to it via Safari.

Because the judge forbidden apple to disallow developers to put links to the "external" payment systems.

 

[djcerla]

I'm sorry, but how is 10% vs 15-30% not competitive?

Because added friction, and less sales.

BTW if you quote, quote well: I said “it’s not very competitive” not “it’s not competitive”.

 

[rweiser]

This may benefit developers, but it won't benefit users.

True. Though in theory, anything that benefits developers also benefits users. The more developers see (financial) opportunity in the App Store, the more (good?) apps will be developed. In theory.

 

[Saladin12]

"In addition to lower fees, Paddle said benefits of its payment system will include access to customer data"

And there's the privacy Apple warned about. Imagine Visa giving your address to all the shops you buy from.

Yep, and that's exactly where Paddle lost me in all of this.

 

[aidler]

I'll just say: This is very interesting and exciting. Exactly the disruption the stagnant iOS market needs.

 

[Kuckuckstein]

Now that is some real banking ********.

To some degree I understand that Apple needs a means to finance their servers, logistics around the App Store, they give away the OS for free and need to finance it in some way etc., though their immense profits show that they collect far more than needed … and yeah yeah - profit organization bla bla - they should just say “we collect as much money as we can until we feel resistance”, instead of the “buhu, if we don’t take the share we cannot ensure a Golden App Store standard”. Still, Apple has some serious expenses to provide what they provide.

But, compared to the expenses Apple has any such payment service can’t even come close. A single percent … Ok. But if the service is used a lot, even that would make them super rich with minimum efforts (why else is the stock market so fixated on even fraction of cents).

The business strategy is clear: take a bit less than Apple, user is not affected, developer gains. Business shifts to them.

Providers of content having their own shop: ok. Third party systems … utter rubbish.

 

[Natrium]

I think Paddle is shooting themselves in the foot by calling this an “alternative in app purchase system”. From the ruling it does not follow that Apple has to allow any alternative “in app purchase” system.

On the contrary, the court ruled that Apple requiring developers to use Apple's In-App Purchase systems for in-app purchases does not violate anti trust laws (ruling, p. 150):

Thus, the Court concludes that Apple’s restrictions as to its IAP and separate payment processors do not violate Section 1 of the Sherman Act.

Apple only has to allow developers communicate external purchase systems, based on the ruling. So a button to Peddle’s website where you can make purchases would be okay. Which is actually what Paddle appears to demonstrating.

 

[Taustin Powers]

We'll see if this is even possible. Don't Apple just need to allow external links to websites with direct payment options? Integrating this "Paddle" option into the apps goes a big step further than that.

It will also be interesting to see if developers offer lower prices for users who don't pay through the App Store.

As for myself, I would never use a service like "Paddle", as it is a very blatant attempt to cash in on this whole mess that Epic created. No, thank you.

 

[SqB]

I'll just say: This is very interesting and exciting. Exactly the disruption the stagnant iOS market needs.

Joking right? This sort of “disruption” and fracturing sure doesn’t seem to be producing any “innovation” over on the Android side, despite the larger market share and the fact it’s been possible there all along.

 

[cgs1xx]

I don’t get this debacle.. if you don’t like Apple’s platform and fee structure, just take your app and your business elsewhere… 🤷🏻‍♂️

 

[Googlyhead]

Even if the payment (interface) is handled outside the App Store; that doesn’t mean that Apple will have to permit the entire transaction to occur outside.
I can envision possibilities for how they implement this ranging from the external payment simply creating a virtual credit that is passed back to the App Store itself, to requiring a certain percentage of all transactions as a condition of hosting the app.