Spotify is the first Play Store app allowed by Google to offer third-party in-app payment options

For the longest time, Android developers were forced to only implement Google‘s payment service in their applications or risk facing a penalty. But that all changes this year as Google will be allowing for developers to offer their own payment services alongside its own. This is part of Google’s User Choice Billing policy which was created after being pressured by regulators in various countries to give consumers and developers the option to use an alternative payment system.

Popular music streaming service Spotify will be among the first to offer an alternative payment option on its Android app under this pilot programme. Spotify says the option will begin rolling out later this year. At the moment, there are no details on which countries will receive the update first, but it vaguely said the option will be available for countries “around the world.” Google nor Spotify has stated if the credentials stored in the Google Play Billing system can be accessed to automatically fill the information required by the third-party payment system.

According to Google’s official blog, this policy change was influenced by a bill passed by the Korea Communications Commission (KCC) that bans major app store operators from forcing app developers to use their payments systems.

So how does this new policy work?

Well, before we proceed, you should take note that this change will only affect app developers who offer a subscription service for now. Normally, developers will be charged up to 30% transaction service fee, but starting from the 1st of January 2022, Google will halve the fee to 15%. Under the new policy, if the transaction for the subscription is made using the developer’s payment service, the service fee will be reduced by 4%.

Meanwhile, for apps that are under Google’s Media Experience Program like eBook providers, the transaction service fee is 10%, while using an alternative payment method will be 4% lower at 6%.

“This pilot will allow a small number of participating developers to offer an additional billing option next to Google Play’s billing system and is designed to help us explore ways to offer this choice to users while maintaining our ability to invest in the ecosystem,” Google expressed on their blog.

So, developers are not completely exempted from paying the fee but Google has its own justifications. By still charging a small service fee, it will allow Google to continue investing in the payment ecosystem, which presumably revolves around security. This will ensure these alternative payment methods will comply with the high safety standards in protecting users’ personal data and sensitive financial information set by Google.

The next implementation of Google’s User Choice Billing can be for in-app purchases, commonly found in mobile games. Currently, Google charges a 15% transaction service fee for the first USD1 million (RM4.2million) in revenue that the developer earns, while subsequent amounts will have the full 30% fee imposed.

As for Apple, it has yet to announce any kind of meaningful changes to its policy. In the Netherlands, it was reported that Apple reduced the transaction service fee for dating apps to just 27% from the original 30% if a third-party payment service is used. This move was viewed by the Authority for Consumers and Markets as still placing an unreasonable financial burden on app developers and thus not complying with regulations.

As a result, Apple has been fined by the local authority, EUR5 million (RM23 million) each week for five consecutive weeks as reported by Reuters in late February 2022.

This high “Apple tax” is also the reason why Fortnite developer, Epic Games choose to offer its own payment service next to Apple’s. Furthermore, Epic Games passed down the cost savings to the consumer, which was displayed next to the more expensive price of using Apple’s payment service. It also pulled this stunt on the Android platform as well.

As a result, it got booted from both the Apple App Store and Google Play Store. Epic Games retaliated by filing a lawsuit against the two platforms for monopolistic behaviour.

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