What’s the news: Google on September 2 expanded its “User Choice Billing” pilot to India, allowing certain apps on Play Store to offer an alternative billing system alongside Google’s in-app billing. Currently, the only option for developers is to offer users Google’s billing system for in-app purchases of digital content and services and pay the company a commission that ranges from 10-30 percent. The new program will allow developers to offer users their own billing systems or billing systems from payment providers that charge a lower commission than Google.
What’s the catch:
- Currently, the pilot is only available for non-gaming apps
- Developers must still pay Google a commission albeit it will be reduced by 4 percent if the user chooses to use the alternative billing system
Why does this matter: Developers have criticised Apple App Store and Google Play Store for forcing apps to use in-app billing systems and levying excessive commissions. But due to regulatory pressure from around the world, both companies have had to make concessions in the last year. User Choice Billing is one of the most significant concessions that Google has had to make to date and it doesn’t seem like it will end here.
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Which countries have the User Choice Billing Program expanded to:
- European Economic Area (EEA) countries
Android has always been a uniquely open operating system, and we continue to evolve our platform and increase the choices available to developers and users, while maintaining our ability to invest in the ecosystem. […] We will be sharing more in the coming months as we continue to build and iterate with our pilot partners. — Google spokesperson to 9to5Google
What does it mean for the CCI investigation: When Google first announced in September 2020 that the use of the in-app billing system is mandatory for all apps, Indian startups rebuked, and eventually filed a complaint with the Competition Commission of India (CCI), which in November 2020 began investigating Google’s Play Store practices. An order from the CCI was expected in April 2022 but we’re still waiting. The Economic Times reported earlier today that CCI is in the final stages of wrapping up the investigation. Regardless of when CCI’s order comes out, there is plenty of uncertainty as to what will happen next. Suppose CCI rules that mandatory in-app billing and the high commission are anti-competitive, Google will argue that it has changed these policies with User Choice Billing. This might result in CCI taking a relook at the case or a long-drawn legal battle at Indian courts.
Why are non-gaming apps not part of the program and when will they be: “At this stage of the pilot only non-gaming apps qualify for user choice billing. We expect the pilot details to continue to evolve as we learn more and receive additional feedback,” Google said. It’s not clear why Google has excluded gaming apps. It cannot merely be security concerns because the same concerns will apply to non-gaming apps offering in-app purchases as well. One possible reason could be the financial repercussions that the company will face by expanding the program to gaming apps, which contribute to over 90 percent of the Play Store revenue.
Why does Google still charge a commission: The biggest contention against Google is not that they force developers to use the in-app billing system, but the high rate of commission they charge. But the User Choice Billing program does not address this concern because developers still pay a high commission. For a developer that used to pay 30%, User Choice Billing will reduce it to 26%, which is arguably still too high. Google has defended this by stating that:
“Google Play’s service fee has never been simply a fee for payment processing. It reflects the value provided by Android and Play and supports our continued investments across Android and Google Play, allowing for the user and developer features that people count on.”
How is this different from what Google offered Spotify and developers in Korea and Europe:
- Spotify: User Choice Billing was first piloted in March 2022. Back then Google said that it will allow a small number of participating developers to offer an additional billing option. However, Spotify was the only developer that participated in this program before it expanded to the current version.
- South Korea: Despite South Korea not being part of the user choice billing pilot, developers in the country are allowed to offer an alternative in-app billing system alongside Google Play because of a regulation passed last November that requires Google and Apple to open up their app stores to third-party billing systems. The same 4% reduced commission as User Choice Billing applies to South Korea.
- Europe: In Europe, thanks to the upcoming Digital Markets Act, Google in July began allowing non-gaming developers to offer another billing system standalone, i.e. without offering Play Store in-app billing alongside. This gives developers much more leeway because they dictate which billing system will be used rather than giving users the option to pick between Google’s and an alternative. However, when a consumer uses the alternative billing system, the service fee the developer pays will be reduced by 3%, which is lower than the 4% reduction in User Choice Billing.
What are the requirements to qualify for User Choice Billing:
- Only offer alternative billing systems within the app
- Only offer user choice billing to mobile and/or tablet users in announced pilot countries
- Comply with the Payment Card Industry Data Security Standard (PCI-DSS) (if handling credit and debit card data).
- Provide customer support and dispute resolution for users of the alternative billing system
Can developers use links for alternative payment systems: “Yes, this program allows developers to use web-based payments as an alternative payment method in an embedded webview within their app,” Google explained.
Will Apple follow suit: Apple is yet to announce any similar programs but will eventually do so due to global pressure. In some parts of the world, Apple has made certain concessions. In the Netherlands, for example, Apple allows dating apps to offer alternative billing systems, and in South Korea, all apps are allowed offer alternative billing systems.
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