App Store developers inventing new ways to bypass Apple Tax: Will iPhone maker start billing developers separately?

Apple Tax Revenue Delivery System In-App Payment External Third-Party
Multiple developers developing multiple in-app payment systems. Pic credit: moparx/Flickr

Developers, building and distributing their creations on Apple Inc. App Store, are giddy with the exciting possibility of bypassing the Apple Tax entirely. However, the iPhone maker could very easily nullify the potential windfall app creators are expecting from Apple Inc. Vs. EPIC Games trial.

Apple Inc. App Store for iOS and iPadOS is gradually heading towards an inflection point. The company could soon have to loosen the reins it currently holds on to the app marketplace. Although the company could suffer a little, Apple Inc. does have some tricks to mitigate the potential losses.

Developers and Platforms eagerly developing multiple in-app payment systems in anticipation of new App Store policies, but Apple Inc. is silent:

Apple Inc. currently charges a 30 percent commission for every sale that takes place within the App Store. Developers call this the Apple Tax.

There’s no denying that Apple Inc. Vs. EPIC Games and its Coalition for App Fairness could have a significant impact on the App Store policies, particularly pertaining to in-app payment systems. There’s a strong possibility app developers could avoid the infamous Apple Tax.

Anticipating the same, developers are actively developing new software and platforms that allow app creators and service providers to bill customers without going through Apple Inc.’s in-app payment system.

The new software essentially bypasses the Apple Tax. Needless to mention, this could directly threaten one of the biggest revenue sources for Apple Inc. The App Store contributes 20 percent of Apple Inc.’s revenue.

A federal judge ruled in September that Apple has to let app developers link to alternate payment systems. However, Apple Inc. still doesn’t allow app creators to use their own apps to inform users about third-party payments.

Interestingly, EPIC Games has expressed displeasure about the recent ruling. Hence, it is quite likely the litigation process could continue. The ruling, however, takes effect on December 7, 2021.

Developers are unsure how Apple Inc. will proceed as the company is completely silent about potential Apple Tax bypass:

Apple Inc. has not shared any details about how it plans to comply with the recently passed order. This has created a lot of uncertainty about third-party payment mechanisms.

Paddle, a Revenue Distribution company, has built three different implementations of an iPhone payments product. The company hopes at least one could comply with the rules, and be ready for deployment.

One of the versions reportedly involves a Software Development Kit (SDK) that lets app-makers offer monthly or annual subscriptions with an “Upgrade Now” button. Another company, RevenueCat, has a similar browser-based payment system. Developers can easily add this to their apps, claimed CEO Jacob Eiting.

It is not immediately clear how Apple Inc. will respond or comply with the order that mandates the provision for third-party payment systems. However, it is quite likely that Apple Inc. will mandate going through its own in-app payment platform.

This could mean that Apple Inc. will have a clear idea about the revenue. Hence, the company could easily deploy a billing system that charges app developers in a separate invoicing system. Incidentally, Apple Inc. CEO Tim Cook has already hinted at the possibility:

“If not for [in-app purchasing], we would have to come up with another system to invoice developers, which I think would be a mess.”

Off-platform billing is common for expensive software and subscription services. Some financial experts estimate Apple Inc.’s earnings might take a hit of just about 4 percent.

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