
What Apple Pay Could Mean for In-App Purchases - jamesmoss
http://markokarppinen.com/post/97133131413/whither-iap-or-what-apple-pay-could-mean-for-in-app
======
PinguTS
He is wrong. In fact Apple charges the banks:
[http://www.bloomberg.com/news/2014-09-10/apple-said-to-
reap-...](http://www.bloomberg.com/news/2014-09-10/apple-said-to-reap-fees-
from-banks-in-new-payment-system.html)

Which makes sense, when you read the technical details published earlier today
here on HN: [http://clover-developers.blogspot.de/2014/09/apple-
pay.html](http://clover-developers.blogspot.de/2014/09/apple-pay.html)

~~~
Justsignedup
Banks make money from credit cards by

* charging a % from each transaction

* late fees

* interest on balances

This assumes banks make less money on transaction fees than they do on the
other two when coupled with the potential for fraud... An interesting
assumption...

~~~
ssharp
Is this how it works? My assumption was that Mastercard, Visa, American
Express, and Discover were the ones that made the % of each transaction and
then the issuing banks were the ones that made the money from fees and
interest.

~~~
dangrossman
Most of the fees end up back with the card-issuing banks. That's how they pay
for the rewards programs, and why the fees are higher for rewards cards than
other types.

------
mstolpm
I don't think Apple Pay will have any implications on IAP in the near future.
Apple guidelines clearly show that Apple Pay is for physical goods and
services, IAP for digital stuff:

"It is important to understand the difference between Apple Pay and In-App
Purchase. Use Apple Pay to sell physical goods such as groceries, clothing,
and appliances. Also use Apple Pay for services such as club memberships,
hotel reservations, and tickets for events. On the other hand, use In-App
Purchase to sell virtual goods such as premium content for your app, and
subscriptions for digital content." Source:
[https://developer.apple.com/apple-pay/Getting-Started-
with-A...](https://developer.apple.com/apple-pay/Getting-Started-with-Apple-
Pay.pdf)

------
EGreg
I see ApplePay and Google Wallet as the Virtualization of payment, basically
turning your credit card accounts into electronic accounts with per-device and
per-payment tokens. Which means that security will be a lot easier, numbers
can't get stolen, and the merchant now doesn't AUTOMATICALLY get your info
from your credit card, while retaining the ability to track you (probably) as
long as the Payment Processors allow it.

HOWEVER! It also means that these companies will need to integrate their new
payment system deeper and make it compete with IAP on their own ecosystem.
Since this system disrupts credit cards for real world purchases, it can't
take a 30% cut. So you end up with two systems of payment, one which takes 30%
and one which doesn't. You can bet your buttocks that publishers of online
content will try to find ways to use the CREDIT CARD PROCESSING system instead
of IAP, even if it means no fancy things like recurring subscriptions - things
which ApplePay will have to add later. In short, Apple will have to bend over
backwards to justify preserving the 30% cut on IAP. That 30% incidentally is
also what keeps all apps from being free in the store - once IAP is cheap, why
charge people 30% upfront for the app?

In short, I'm interested to see how Apple is able to keep ApplePay from
cannibalizing its revenue from the App Store, by disrupting its own IAP
service.

~~~
logician76
I agree that this is the most interesting thing to watch for, whether apps
will go with ApplePay or IAP. However it seems that credit card transactions
also have a fixed per transaction fee of 19 cents or higher, not sure what
these are for ApplePay yet, but that could factor in when IAP are just 1
dollar amounts.

------
dognotdog
The Appstore revenue is dwarfed by hardware sales, with all of Appstore/iTunes
revenue being less than 10% of iOS hardware sales.

Apple certainly doesn't NEED the 30%, but it's very doubtful they'd reduce it.

~~~
frogpelt
I would guess that the profit margin on IAP is higher than on hardware.

How much does it cost to maintain the servers and infrastructure associated
with IAP vs. the cost of building hardware?

------
craigching
If you do away with 30% of IAP, then you may as well get rid of the 30% cut in
the app buy itself because if IAP is basically free, no one will charge for
the app and will instead monetize the app through IAP. This would arguably be
a worse experience for customers IMO. And I can't see Apple letting 30% for
the app buy go either.

~~~
Pxtl
Exactly. That's what confuses me - with this approach, a company could use
Apple Pay to circumvent all the app store fees altogether.

------
Woozey
Where does it say that in app delivered digital content will be allowed to be
purchased by Apple Pay?

~~~
julien_c
Nowhere, and it probably won't.

~~~
Woozey
That's what I thought. The article does not make that clear at all. So the
hypothetical payment model suggested is directly against the guidelines of
what currently exists. A model that explicitly requires in-app digital content
and subscriptions to be paid through IAP. While you can use external payment
in app for other types of payment e.g. Hailo. There is no reason at all for
Apple to deviate from this model because of Apple Pay. What are the
assumptions in this article based on? I really don't know why the author is
suggesting the above - and that's without going into the financial
implications.

------
janfoeh
What I would like to know is if Apple has any plans to make Apple Pay
available for the mobile web?

Implementation issues aside, I am not too hopeful on that front. Which is
really a pity, because it would be so much more useful in a browser context.

For one-time purchases I am not downloading an app, and even for shops I use
regularly I overwhelmingly prefer the web, because most apps are markedly
inferior to their browser cousins.

See: Amazons Windowshop apps' lack of filtering.

~~~
callmeed
I agree it would be useful, but I can also see a myriad of reasons why they'd
never do it.

------
dirtyaura
It's an interesting change for SaaS services too. For example, just a few days
ago I paid for Evernote Yearly subscription through iAPs, which meant that
Apple took a 30% percent cut of that $45. If Apple allows Apple Pay for SaaS
subscriptions, what that will mean for iAP economy in general? Will Supercell
implement a subscription service for Clash of Clans with a monthly amount of
virtual currency?

~~~
PinguTS
But still there is the question, did Apple took all those? I would say, it
depends.

World wide, you can buy those prepaid iTunes cards to fill up your account. I
do that regularly. I do this, because at least here in Germany from time to
time the merchants have discounts of 25% to 30% on those cards. Thats no shady
merchant, but the big brick and mortar chains.

That let me assume, that Apple is selling those cards to those merchants with
about this discount.

------
calvinbhai
go to this link [https://developer.apple.com/apple-pay/Getting-Started-
with-A...](https://developer.apple.com/apple-pay/Getting-Started-with-Apple-
Pay.pdf)

scroll down.

It says clearly: Apple does not charge users, merchants or developers to use
Apple Pay for payments. Your credit and debit transactions will continue to be
handled by the payment networks.

------
chmars
> According to Bloomberg, Apple is charging banks. > But that is coming from
> the fees paid to banks by > merchants, so the thesis about this being free
> for > both merchants and customers still stands.

Apple is charging the banks and the banks are charging the merchants – so it
is not free … and of the Apple _and_ bank fees are of course part of the
customer price.

------
zura
Anyone can point to the list of supported merchant/developer countries for
Apple Pay? Or is there any plans to add new countries to apple appstore?

It is 2014 and I'm still unable to publish [any] apps on Apple app store and
paid apps on Google Play... I'm based in Georgia, Europe.

~~~
amirmc
Visit the iPhone 6 page and scroll down [1]. There's a list of participating
banks and merchants (currently US only).

[https://www.apple.com/iphone-6/apple-
pay/](https://www.apple.com/iphone-6/apple-pay/)

------
hackerboos
So companies[1] that had to previously shut down because of the 30% can
return?

[1] - [http://www.cnet.com/uk/news/as-iflow-reader-app-closes-
harsh...](http://www.cnet.com/uk/news/as-iflow-reader-app-closes-harsh-words-
for-apple/)

~~~
ceejayoz
Almost certainly not.

Credit cards have always been a usable payment method, Apple Pay just makes
them easier to use in an app. No one used them for IAP of digital goods
because Apple forbade that on a policy level, which is likely to continue.
Likewise, apps already allow credit card purchases for real-world items like
Uber rides, Amazon physical items, etc.

------
personZ
"The 30% IAP cut equals billions of dollars in yearly revenue. But being in
this commission business is not in Apple’s DNA."

I would say it is entirely in Apple's DNA. Apple has aggressively tried to
inject themselves between sellers and buyers in multiple markets, even where
their value add is unwanted and unnecessary.

And I don't fault them at all for that. They're a business and they're doing
what businesses do, growing revenue. Trying to get a pound of flesh from the
payment industry process is something many players are aggressively trying to
do right now, and Apple is no exception.

And of course in the end all fees end up being borne by consumers.

One fallacy that many make in such discussions is the argument that Apple
makes so much from hardware they really don't care about the smaller parts of
their business, yet they have shown that they care very much about it. Don't
think of Apple (or Google, or Microsoft, or any other growth company) as a $
_N_ billion dollar company -- every day they are, to the people fighting for
more market, a $0 company, because all that matters to the tiers and people
involved is $(M-N) tomorrow.

~~~
ThomPete
The 30% as far as I understand is roughly covering the cost of running the app
store. I.e. huge revenue but not really much profit.

~~~
personZ
I would be really surprised by that. The gross 30%, presuming it always
applied, would be about $6 billion per year, which would be an enormously
expensive online store. Of course Apple's cut is often lower than 30% -- I can
frequently buy $100 iTunes cards at Costco for $80, for instance, and then add
that the retailer surely gets a cut as well.

Nonetheless, the iTunes empire is currently doing almost $20B of business a
year, with a $6B cut. The NFL, in contrast -- for all its seeming enormity and
influence -- is about a $8B business, gross.

~~~
amatheus
The app store has free apps too, it could be said the paid apps are
subsidizing the free ones.

~~~
chrischen
Subsidizing the bandwidth costs? Because the free app developers surely don't
see any of that 30% cut app charges other apps.

~~~
ThomPete
The apps needs to be approved. The majority of cost from running the app store
is the people who work there.

------
Someone1234
> It’s an uncomfortable truth, but most publishers can’t be reasonably trusted
> with personal information like email addresses and phone numbers.

Citation? Anything? That point isn't well explored but it is a "truth"
apparently.

~~~
nemothekid
Security. Given the recent attacks on retailers, it seems retailers aren't
adept in making sure their customers information is protected.

~~~
Someone1234
He said "publishers" not retailers.

------
3pt14159
The reason that the friction argument is bullshit is that Apple forces you to
use their system. If their system truly was better, (higher conversion) then
they could reasonably explain this to the people they charge.

Another reason that 30% is BS is that it leaves no room for low margin sales.
If I make an app that helps you find and buy the right computer monitor or TV,
I'd have to mark it up 25% in order to break even after Apple takes it's cut.

