New South Korean Law Changes App Store Payments

Things could soon change in South Korea when it comes to App Store payments. The South Korean National Assembly’s amendment to its Telecommunications Business Act threatens app store owners’ ability to force developers into using their in-house payment methods. We have been following this legislation for a while and it came up for a vote this week after passing through committee hurdles.

The Current State of App Store payments

Right now, Apple and Google take a 30 percent cut of just about everything you do on their app stores. This includes any app you purchase, in-app sales, and subscriptions. Developers can’t use any payment option other than the one built into the App Store or the Google Play store.

This has been a bone of contention with developers for years. Smaller, newer developers are sometimes reluctant to get involved in mobile apps. Even some of the bigger developers, such as Epic Games, fight these requirements in court.

South Korea’s Telecommunications Business Act Changes Everything

With the amendment to South Korea’s Telecommunications Business Act, app store owners won’t be able to require developers to use the in-house payment systems. App Store payments could open up to other options, like Square, Stripe, or other credit card processors. The law also bans the App Store owners from unreasonably delaying the approval of apps or deleting them. The country fears app stores might take these steps to retaliate against developers who choose an outside payment method.

The law passed South Korea’s National Assembly, and we expect President Moon Jae-in to sign it into law very soon. Once it becomes law developers will be free to search for a payment provider that offers them the best deal. Of course, it may. be some time before South Korea can actually enforce the law. Google and Apple are bound to try fighting it in court.

Google’s and Apple’s stores provide pretty good benefits, like user authentication for purchases. They also tend to be easy for consumers to use, since payment information is securely stored. Google and Apple also offer easy data hosting and distribution for digital goods.

If a developer decides it doesn’t need those things, or it can create its own solution, there are other options. Most credit card processors take much less of the sales than Google and Apple. For example, the developer could wind up losing only 3 percent of each sale in credit card fees instead of 30 percent.

Google and Apple Respond to the Law

A Google spokesperson told The Verge, “just as it costs developers money to build an app, it costs us money to build and maintain an operating system and App Store”. Apple’s response to the new law touched on the safety of its ecosystem. An Apple spokesperson said, ”the proposed Telecommunications Business Act will put users who purchase digital goods from other sources at risk of fraud”. Apple also pointed out that it will be more difficult for users to manage the purchases, making parental controls and features like “ask to buy” less effective.

If the law stands, it could mean a sizable impact on both Google’s and Apple’s app store revenues. While neither company gives exact app store revenue numbers, analytics firm Sensor Tower estimates that Apple’s App Store facilitated $72.3 billion in global spending in 2020. Google Play, on the other hand, did $38.6 billion in sales.