What the Epic v. Apple ruling means for your in-app payments

After the closure of the influential Epic v. Apple trial, a California judge has ordered Apple to immediately remove its anti-steering rules, which barred app developers from offering payment methods outside of Apple’s in-app purchasing system. Further, the court ruled that Apple’s current developer agreement violates California’s Unfair Competition Law by mandating the below:

“Apps and their metadata may not include buttons, external links, or other calls to action that direct customers to purchasing mechanisms other than in-app purchase.”

Now apps on the iOS store will be able to offer alternative payment processing methods inside and outside the app, skirting Apple’s native payment processing fee that runs between 15 and 30%.

After a lengthy legal battle, what does this ruling mean for developers with apps on the iOS platform? Opportunity. But for those who seize this opportunity, greater responsibility as well, especially when it comes to the quality of their payments experience.

What started the trial?

Before this week, Apple mandated the use of their in-app purchase (IAP) payment processing. From subscriptions to add-ons, all purchases made in the app were subject to up to a commission. The App Store then also handled payments, records, taxes, and the functionality of the payment gateway. The payment funnel for every app was unified and secure through iOS.

A typical payment process looked like this:

Customer downloads the app > customer wants to purchase an item > customer purchases in app > order complete > Apple: 30%, App parent company: 70%

This setup did take the burden of creating and testing payments processing off the shoulders of app developers. While the arrangment worked for smaller developers, many of the larger developers felt that Apple’s IAP wasn’t worth their cut of the commission. Epic, creators of mega-popular game Fornite, engineered their iOS app to offer two payment options: IAP through Apple or direct payment to Epic with a consumer discount. Apple de-listed the app, and Epic took them to court.

Epic argued that Apple’s anti-steering policies and mandated IAP created an unfair monopoly on payment processors and charged an exorbitant fee to use their system. Apple argued that their IAP benefitted developers since they maintain a high level of functionality and security across apps in exchange for their commission fee. 

The judge handed down a ruling that developers are now legally allowed to offer a link to complete payment in a new tab, using whichever payment process provider they choose. 

The payment process can now look like this: 

Customer downloads the app > customer wants to purchase an item > customer is redirected to the native site to pay > order complete > App company: 100%

App developers are already moving to take advantage of the ruling. Match Group, the parent company of dating apps Tinder and Hinge, was slated to pay more than $500 million in commissions to Apple and Google. Gary Swindler, Match’s finance chief, said this was their single most significant expense. The company is already hailing the Epic v. Apple ruling as a pathway to cut costs with plans to reroute traffic to their native website to complete payments.

What does this mean for companies on the App Store?

You now can control a new aspect of your customer experience — the payment funnel. But payments are tricky, and if you want to release a high-quality native payment option, it needs to be on par with the seamless experience that Apple was providing. 

Developers who want to offer alternative payment options are responsible for ensuring functionality, UX, safety, and security. 

Denys Zhadanov, Board Member at productivity app developer Readdle, noted some significant implications for developers. 

“AppStore took care of all the activities around payments, taxes, etc. That was super handy for smaller developers. For mid-sized developers… the new rules mean potentially extra revenue (millions of dollars),” he said. “Developers can create better experience(s): flexibility of the payment/ billing options, adding people to the team, having a centralized payment option, where the App Store billing system falls short.”

Beyond taking an active role in the payment funnel, companies now have a more direct customer channel. 

Companies with iOS apps that decide to reroute, or use native payment options, now have access to customer data previously locked down within Apple’s IAP. In-app client information can now be used to set up promotional emails, look up orders online, issue refunds, and manage subscriptions. 

Despite some immediate benefits, developers need to be cognizant of consumers’ complicated feelings around the shift. 

Ensure high-quality payment options through payment gateway testing

Consumers are used to the ease, functionality, and comfort of the current IAP. The mix of Apple IAP and 3rd party payment processors can be confusing and frustrating for app users.

Naturally, such a rapid shift can also inspire some user distrust. Are third-party payment channels safe? Is there a benefit to using them over Apple Pay? Do I have to input my credit card information EVERY time?

The most efficient way to gain back the trust is to offer seamless, functional payment funnels that are reliable, safe, and thoroughly tested. 

Test your payment gateway functionality to meet best practices, including end-user UX, multiple integration cases across O/S and device combinations.

If a web or mobile app’s payment processing runs into issues, it can lead to severe financial headaches. Loss of funds, over or under-payments, penalties, and valuable time lost identifying and rectifying errors. Not to mention the loss of trust and reputation with customers and third-party businesses.

Before deciding to offer a new native or third party payment processor, run through five major tests.

• Check Card Numbers. Can the payment gateway handle credit and debit card information from different financial institutions in multiple countries?
• Check for Time Outs. What happens if a session ends or a time-out before the transaction is fully processed and completed?
• Successful Payment Confirmation: To confirm that a payment has been successful, test all elements of the funnel to verify that financial information was shared between customer, merchant, and financial institution.
• Verify Transaction Processes. The payment gateway test must verify complete end-to-end financial transaction processing.
• Payment Fails. If there has been a failed transaction, at what point did the transaction fall through?

Thorough payment gateway testing will ensure that customers, merchants, and financial institutions operate through a platform with the highest functionality and usability parameters.