If you live in the EU and pay for things on your iPhone, major changes are coming next month that will transform both the way you pay in some apps and the way those payments are processed. Likewise, if you’re a business that accepts payments from EU consumers within the Apple ecosystem, read on.
What’s Changing? For the first time, Apple will let businesses use alternative PSPs for in-app payments for digital goods & services.
Thanks to the Digital Markets Act (DMA), Apple is making the biggest modifications ever to its App Store ecosystem. Set to roll out on March 7th alongside the release of iOS 17.4, merchants will gain unprecedented freedom regarding payment options, while consumers will gain more choice in how they pay across iOS, iPadOS, macOS, and watchOS payment experiences.
What these changes really mean
Starting next month, merchants will be able to use alternative payment service providers (PSPs) for in-app purchases and will also be able to link out to their own webpages to complete transactions across Apple’s operating systems.
They will also be able to use new DMA-compliant APIs to support contactless NFC-powered payment transactions directly from within their own wallet apps. This means point-of-sale payments where you take your iPhone out to pay in-store may not necessarily rely on Apple Pay.
Alternative EU payments on the App Store
Merchants now have a few new options to choose from regarding how they accept in-app payments.
Under the new terms, merchants can opt to pay Apple a reduced 17% commission (vs. 30% currently), regardless of their choice of payment processor. This further drops to 10% for qualifying small businesses.
If choosing an alternative PSP or linking out, Apple charges no additional fees. However, using the App Store payment processor incurs a 3% processing charge. Apple has also introduced a “Core Technology Fee” of €0.50 per annual app install after the first million installs in the EU, to account for large, popular apps. Spotify is very happy.
Apple published a handy commission calculator so businesses can estimate the impact on their bottom lines.
NFC Payments: More Than Just Apple Pay
Additionally, after the European Commission's almost 4-year investigation into Apple's alleged anti-competitive NFC payment restrictions, third parties will now get access to the iPhone's NFC capabilities. While Apple has allowed NFC use for scanning tags (often seen on modern business cards), it restricted contactless payments to Apple Pay.
What Does This Mean for Consumers and Businesses?
For consumers, this ends Apple's effective monopoly on in-app payments which influenced the pricing of digital goods and services due to Apple's 30% cut. With lower commissions, merchants may potentially lower prices.
Prices aside, iPhone users can expect a better user payment experience too. EU customers may also see their favorite apps begin to share details of new deals, promotions, or even better-value payment options, which have until now been barred from App Store experiences.
Apple has outlined detailed security plans to ensure continued safety, including the need for apps to have a “notarization” by Apple that ensures consumer protections are maintained. When downloading an app, users will also be shown whether it uses alternative PSPs or links out for purchases on the confirmation sheet. Product pages will also display informative banners.
Businesses can finally link out of their app to ask users to pay and offer promotions, discounts, and other deals inside their app.
Whether businesses who accept in-app payments should choose to continue with the existing App Store payment processor or choose an alternative that better suits their operational needs depends of course on their volume, methods of payment (be it one-time, subscription, or automatic top-up of balances), and whether they can find more cost-effective ways to accept payments and avert Apple’s 3% commission.
For businesses considering alternative payment solutions, Praxis Tech offers a unified integration experience that eliminates drawn-out integration processes with over 540 global PSPs. Get in touch to learn more.
Payment Developments in the US
There have also been major developments in the US Apple payments landscape following the high-profile Epic Games v Apple lawsuit. Epic, maker of the hugely popular Fortnite multiplayer game, sued Apple in 2020, challenging the company’s restrictions on apps from having external in-app purchasing methods outside of those already offered in the App Store.
After declining to hear Apple's appeal, the Supreme Court let stand a District Court ruling requiring the tech giant to allow developers to link to outside payment methods. Apple said it will allow linking out to non-Apple payment processors but will charge a 27% fee to do so. Epic's CEO called this “bad-faith compliance” and may launch another legal challenge. More updates to the US landscape are likely ahead.
Key Takeaways for Merchants
The EU and EEA-specific announcements will change how payments are processed within Apple’s app ecosystems in March, and while consumers may not at first see a huge difference, their payment experiences are sure to be impacted.
Likewise, businesses that have payment operations within Apple’s ecosystem should take a closer look at how these changes with affect their bottom lines.
As a payment technology firm with its own payment orchestration platform, Praxis Tech supports online merchants to integrate various alternative payment methods into their checkout experiences and is integrated with over 540 global PSPs. Contact us to learn more about how we can support your business’ payment strategy and operations.