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Apple will soon allow alternative payment options for developers in South Korea

The decision is in accordance with South Korea’s new law that regulates app stores through safeguards and penalties.

The Korea Communication Commission (KCC) said on January 11 that Apple has submitted plans to allow developers in South Korea to use third-party payment systems in their apps, Tech Crunch reported.

KCC and Apple are still ironing out finer details of the plan including the new service fee rates and exact launch date, but the service fee will be lower than the 30 percent that Apple charges, The Korea Herald reported.

“Apple has a great deal of respect for Korea’s laws and a strong history of collaboration with the country’s talented app developers […] We look forward to working with the KCC and our developer community on a solution that benefits our Korean users,” Apple said in a statement to TechCrunch.

This will be the first time the iPhone maker allows developers to use an in-app payment option other than Apple’s default option for sales of digital goods and services. While South Korea set the precedent with a law that forces Apple and Google to open their app stores to alternative payment systems, developers and regulators in many other countries, including India, which just launched an investigation into Apple and is already investigating Google on the same matter, are demanding the same.  Apple’s move in South Korea might be a sign of what is to come to the rest of the world.

What is South Korea’s new law for app stores?

On August 30, 2021, South Korea’s National Assembly passed a first-of-its-kind bill that stipulates the following:

  • Use of alternate payment systems: The law enables developers to use their choice of payment systems, effectively allowing them to avoid the commissions charged by Google and Apple. For users, this could mean lower prices because developers will no longer have to account for the commissions.
  • No unusual delay in approval or inappropriate deletions of apps: The new law says that companies that run app stores cannot unreasonably delay the approval of apps or inappropriately delete them from the store. This may have been put in place to prevent companies from taking retaliatory measures when developers choose to use alternate in-app payment systems.
  • The government is allowed to conduct probes and mediate disputes: The new law allows the South Korean government to probe app market operators, and mediate disputes regarding payment, cancellations or refunds in the app market, Reuters reported.
  • Penalties for failure to comply: The law says that companies that fail to comply with these new rules could be fined up to 3 percent of their revenue earned in South Korea.

Google will also comply with the new law

In October, KCC asked both Google and Apple to submit plans on compliance with this new law. Google outlined its strategy in November and said that it will give developers the option to add an alternative billing system alongside Google Play’s billing system for their users in South Korea.

The primary reason developers want to use a different billing system is to avoid the high commissions charged by Google, which is anywhere between 10 to 30 percent depending on the type of app and developer. But Google is not letting this happen.

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“Service fees for distributing apps via Android and Google Play will continue to be based on digital sales on the platform. We recognize, however, that developers will incur costs to support their billing system, so when a user selects alternative billing, we will reduce the developer’s service fee by 4%,” the company said.

This means developers who were earlier paying 15 percent, which is what the majority of developers pay, will now pay 11 percent for all transactions done through the alternate billing system.

Google also pointed out that the alternative billing system will not offer the same level of protection and features as Google’s own.

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