Paddle launches in-app payment service to challenge Apple

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  • Software billing startup Paddle launched a challenger in-app payment service to compete with Apple.
  • Paddle IAP would require app developers to reduce it by 5% to 10%, compared to Apple’s 15% to 30%.
  • Paddle is betting that a court ruling will force Apple to allow third-party payment providers in apps.

Paddle, a UK software billing startup, has unveiled its own in-app payment service to compete with Apple.

The startup is one of the first to try to target Apple’s valued multi-billion dollar app store business after a court ruling in September eased the company’s control over the developers.

the ruling was for a case brought by the “Fortnite” maker

Epic games
, which Apple sued for restricting people’s payment options in iOS apps to Apple’s own system. Apple is cutting up to 30% off digital items purchased in apps, whether it’s in-game items, a music subscription, or software subscriptions, which critics have described as a tax. Judge Yvonne Gonzalez Rogers ruled that developers must be free to advise users of alternative payment options.

Paddle IAP would replace Apple’s current mechanism for paying for digital items through apps and make a smaller 5% to 10% cut in app transactions. The company expects a rollout in December.

Paddle in-app payment mechanism

Paddle is among the first to target Apple’s App Store business.

paddle


“That was a long time coming,” Christian Owens, CEO and founder of Paddle, told Insider, referring to legal action in South Korea and Japan that also controls chips at Apple’s App Store. “There’s a bit of face-saving for Apple too, they rely heavily on a large developer ecosystem developing for the iPhone, Mac, and so on.”

Owens added that Apple’s 30% fee was “pretty outrageous”.

“It goes against the pro-developer attitude Apple has in other cases,” he said.

Owens describes Paddle IAP as a “true drop-in replacement” for Apple’s payment mechanism.

Apple does not disclose how much it makes from App Store transactions, although it has said it “eased” $ 643 billion in sales for developers in 2020. For companies like Paddle, even a small fraction of that represents a huge revenue opportunity.

“There is probably no major untapped pool of potential revenue for companies like us all in one place that no one else could compete for,” Owens said. “There’s a pretty universal undertone from people who have to sell on the App Store that they think the fee is too high and use an alternative.”

It’s not clear whether developers will ever be allowed to adopt the “similar, drop-in-replacement” version of Paddle IAP.

The September court ruling is easy to interpret, but there is a consensus among analysts and Apple observers that it could allow developers to instruct users to pay over the internet outside of the app. However, Apple could still mandate the use of its own payment system as a native in-app option.

Technology analyst Ben Thompson wrote after the verdict that Apple’s payment system “goes nowhere: external links can sit next to IAP, but they cannot replace it, and they can never be as well integrated as Apple’s offering.”

When asked, Owens acknowledged that Paddle had developed several versions of its app payment system, including one that “links to the web and then brings the user back to the app after a transaction”.

Consumers would also need to trust the Paddle to Apple alternative and find it easy to use.

Paddle’s service won’t be available for gaming apps for the time being, although in-game purchases make up the bulk of the app store’s revenue. The company is initially looking to target its core software subscription business customer base.

Apple did not respond to a request for comment.


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