- Software billing startup Paddle has launched a challenger in-app payments service to rival Apple.
- Paddle IAP would take a 5%-10% cut from app developers, versus the 15-30% taken by Apple.
- Paddle is banking on Apple being forced to allow third-party payment providers in apps after a court ruling.
- See more stories on Insider’s business page.
Paddle, a UK software billing startup, has unveiled its own in-app payments service to rival Apple.
The startup is one of the first out of the gate to try and target Apple’s estimated multibillion-dollar App Store business after a September court ruling loosened the firm’s control over developers.
The ruling was for a case brought by “Fortnite” maker Epic Games, which sued Apple for restricting the way people can pay inside iOS apps to Apple’s own system. Apple takes a cut of up to 30% on digital items purchased inside apps, be they in-game items, a music subscription, or software subscriptions, which critics describe as a tax. Judge Yvonne Gonzalez Rogers ruled developers must be free to point users to alternative ways to pay.
Paddle IAP would replace Apple’s current mechanism for paying for digital items through apps and take a smaller 5%-10% cut on app transactions. The firm anticipates a December rollout.
“This has been a long time coming,” Paddle CEO and founder Christian Owens told Insider, pointing to legal moves in South Korea and Japan that also chip at Apple’s App Store control. “There’s also a bit of saving face for Apple, they rely heavily on a large developer ecosystem who build for the iPhone, Mac, etc.”
Owens added that Apple’s 30% charge was “pretty egregious.”
“It does fly in the face of that developer-friendly attitude which Apple takes in other instances,” he said.
Owens describes Paddle IAP as a “true like-for-like, drop-in replacement” for Apple’s payment mechanism.
Apple does not disclose how much it makes from App Store transactions, though it has said it “facilitated” $643 billion in sales for developers in 2020. For firms like Paddle, even a small slice of this represents a big revenue opportunity.
“There’s probably not been a larger untapped pool of potential revenue to businesses like us that is all in one place, that no one else has been able to compete for,” Owens said. “There’s a pretty universal undertone from people having to sell in the App Store that they think the fee is too high and would use an alternative.”
It isn’t actually clear that developers would ever be permitted to adopt the “like-for-like, drop-in replacement” version of Paddle IAP.
September’s court ruling is slightly open to interpretation, but a consensus is emerging among analysts and Apple watchers it might allow developers to direct users to pay outside the app, via the web. Apple, however, could continue to mandate the use of its own payment system as the native in-app option.
Technology analyst Ben Thompson wrote after the ruling that Apple’s payment system “is not going anywhere: external links can sit next to IAP, but they can’t replace it, and they can never be as well-integrated as Apple’s offering is.”
Asked about this, Owens acknowledged Paddle had built multiple versions of its app payment system, including one that “links out to the web, then takes the user back to the app after a transaction.”
Consumers would also need to trust Paddle’s alternative to Apple and find it as easy to use.
Paddle’s service will not be available for gaming apps for now, despite in-game purchases representing the bulk of App Store revenue. The firm initially wants to target its core customer base of software subscription businesses.
Apple did not respond to a request for comment.