ApplePay vs. Alternative Payment Services
taler.net
taler.net
In fact, the actual Apple Pay is considered by Apple to be just another form of third-party payments for apps that sell "in-app-purchase like things" (i.e. prohibited by default, begrudgingly allowed where local law prohibits that limitation).
Apple Pay is Apple's payment card wallet, with Apple completely out of the loop for the actual payment, and there's no extra cost on top of the card payment to the merchant.
"In-app purchases" are a "merchant of record" solution where Apple acts as an intermediary between app vendor and buyer. They handle taxation, refunds, promotion etc., and take a generous cut for that service.
Merchant-of-record solutions have their use case (not everybody wants to deal with local taxation, for example!); what many people are mad about is that Apple generally has a rule that says "you must use ours if you're selling "digital goods" unless you're on a short list of exemptions".
This article, as far as I can tell, is trying to make the argument that Apple ought to allow competition between their merchant-of-record solution, other merchant-of-record solutions, and apps directly acting as the merchant, and I largely agree; I just wish it made that point more legibly.
For physical goods etc, like the Apple Store app which the author incorrectly calls out, IAP are not mandated (neither is Apple Pay), and in fact you couldn’t use IAP for physical goods even if you wanted.
If Apple's new rules would be accepted by the EU, the result is that the EU consumer either can (continue to) use the payment system linked to their Apple account to pay for e.g. some outfit in a game like they did the last 15 years, or they can't anymore because the developer chose a 3rd party payment system (e.g. Taler) and is no longer allowed to offer that.
If you think the use of "ApplePay" is confusing, please suggest another short term we should use in the article instead. What about "Apple payments"?
(Demanding all shops in the mall use only 1 payment card (e.g. Costco) is illegal in the EU - except if you don't pay individually in the shops but only once when you leave the mall, since then you are (legally) paying a single merchant (Costco) who of course can decide which cards to accept. But for my airport analogy the customer is paying in the shop/app and not in the mall/AppStore.)
Basically every app I have on my phone that takes payments from me accepts ApplePay and also credit cards.
I've just checked 3 different apps which offer premium features. All of them go straight to Apple Pay, without showing any other options.
EDIT: okay, I think get it now. In-app purchases != taking payments in general. E.g. I have different options for payments when using the Amazon app but only Apple Pay when buying a pro version of a metronome app. It's in-app purchases that force Apple Pay.
To be fair, as a user, I don't see the expression "in-app purchases" while I _do_ see the Apple Pay logo. It's easy to get them confused.
So it's not entirely incorrect (but definitely confusing) to say that the end user is "paying using Apple Pay", but they're paying Apple, not the app vendor.
To be honest, I'm very surprised by that mistake, given where it's published – I'd hope that people working on GNU Taler understand the basics of their competitive environment.
Just on my phone, several apps let me subscribe via the Apple AppStore but also by subscribing on their website with a credit card (like Discord, NYT, AllTrails, HBO, etc)
And that’s not even considering that when I pay for an in-app purchase… I’m paying with my credit card. Apple takes their cut, but it’s still my Amex or visa or whatever that I’m using via my Apple account.
It feels like the only viable part of this beef is that apps can’t accept both in-app purchases and alternate payments directly on their iOS app for functionality within the app?
This is one of the few historical exemptions from Apple's otherwise ironclad IAP rules for so-called "reader apps".
Still, until very recently, these apps could not even mention that you can buy content/subscriptions on their website for cheaper (or, in some cases like the Kindle app, exclusively buy it there), let alone link to said website.
Now, the landscape is somewhat fragmented: In the EU, thanks to the DMA, external linking to external payment methods is allowed, but comes with a "scare sheet" and still grants Apple a cut of 20%(!). (This is about to change, I believe, but I'm not super up to date on it.)
In the US, developers can now apparently link to external payment sites (in SAfari) without Apple being allowed to charge a commission at all. This is a very recent development, and I haven't seen it in action myself.
If there is, it’d be honored in the breach; uncountable apps take card payments but not Apple Pay.
- $ from hardware sales
- $ from developer(s) per year
- % cut from App Store listing
- % cut from IAPs
- very small % cut/recapture from web of fees imposed by banks/cc/debit networks via Apple Pay
They are very motivated to keep all parties within their Apple wall.
I mean Costco has been doing this for many years and people seem ok with it? It's somewhat annoying but I get enough value out of Costco that myself and I think many are happy with the tradeoff.
In fact, Visa's and Mastercard's rules used to even prohibit merchants from any kind of selective acceptance (e.g. "no commercial cards" or "only debit cards") or even from charging different fees by type. This used to be called the "honor all cards rule", but is now no longer legal in many markets in its most narrow form, i.e. "same fees for all cards".
Giving merchants the option of selective payment method acceptance, or of offering discounts for some but not others, is extremely important for competition between payment methods. For example, allowing merchants to charge higher payment fees for cards that pay large kickbacks to the cardholder, or to alternatively give them a direct discount for "cheaper" cards, is one of the few bargaining chips merchants have over the networks and by extension issuers, if one were to try to address the problem of expensive card payments from a free markets perspective.
Outright not accepting one of the two large networks, in exchange for probably a significant cut in fees by the other, is a pretty smart move that works even under "honor all cards", but is only feasible if you're Costco – if you're a corner store, you'd probably just lose roughly half of your customers in the US.
(You were clarifying the difference between these things elsewhere so hoping you could clarify this, thanks.)
(And I want to see more Costco v Apple comparisons!)
I’m just saying these are structurally very different scenarios and I don’t think they can be used as an analogy.
The core issue is that in the case of Costco, there’s only two immediate actors: Costco and its customers. For Apple in-app purchases, there’s three: Apple, app vendors, and Apple users. The argument is leveraging that Apple is unfairly monetizing its captive user base through app vendors.
Now Costco is also leveraging its captive user base, but they are doing so against card issuers, which can be seen as somewhat affiliated with cardholders (and thus by extension Costco consumers) – because they pay them kickbacks in exchange for preferring using one card over the other!
Both fascinating case studies in economics, but structurally distinct.
Costco Warehouse = Apple App Store.
Dyson (vacuum vendor) = WidgetApp (digital goods vendor).
Dyson sold in the Costco Warehouse must use Costco as the merchant. WidgetApp sold in the Apple App Store must use iOS IAP merchant of record solution (??).
Costco Warehouse forces use of Visa (or Mastercard - depends on country). Apple iOS IAP does NOT require Apple Pay.
Of course Apple doesn’t buy goods from suppliers before selling them to customers, unlike Costco. And Costco Warehouse is members only, unlike Apple (unless you squint and view iPhone ownership as a membership).
Imagine people living in houses or apartments with a proprietary kind of power outlet, and the patent owner/real estate developer is willing to grant you, an appliance manufacturer, a license for power plugs compatible with that outlet – under the condition that you exclusively sell them in their storefronts, for a 30% cut.
Like you can buy Henckels knives anywhere, but you can only buy Henckels item 1374080 at Costco [1] - that Costco item number is printed right on the box.
I sympathize with the rent-seeking walled garden argument against Apple. But would it be ok for Apple to require iOS IAP if their cut was not 30% but was instead 25% (like Walmart’s gross margin), or was instead 14% (like Costco’s)? c.f. Apple’s App Store Small Business Program rate is 15%.
Is the percent cut that’s the problem regardless of structure, or is it the structure that’s bad?
[1] https://www.costco.com/henckels-modernist-20-piece-self-shar...