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Merchant of Record vs. Payment Service Provider: A Simple Guide For Mobile Game Developers

Selling directly to mobile gamers on a web store, outside of Apple or Google’s ecosystem, means you’re responsible for everything needed to sell globally.

That includes processing payments, handling refunds, chargebacks, and fraud, abiding by country-specific regulatory compliance, paying sales tax, and more. 

Publishers who wish to outsource some or all of these responsibilities generally have two types of providers to choose from – a Merchant of Record (MoR) – such as Appcharge, or a Payment Service Provider (PSP) – such as Stripe.

But there’s a big difference between these two solutions and what they cover, which is why we put together this guide. Let’s dive in. 

Merchant of Record vs. Payment Service Provider: A Quick Comparison

FeatureMerchant of Record (MoR)Payment Service Provider (PSP)
Provides payment processing tech 
Connects to banking network
Offers a broad range of payment methods
Protects against fraud(For additional cost)
Handles chargebacks and disputes(For additional cost)
Handles customer service issues(For additional cost)
Responsible for data securityDepends on service
Ensures tax compliance
Acts as the seller of record
Manages financial liability
Simple integration and setupDepends on service
Manages broader legal compliance

What is a Payment Service Provider?

Graphic representation of a digital transaction process using PayPal, featuring a clear and modern interface. The screen shows an option to buy coins for $9.90 with payment methods including Apple Pay, a hyperlink for faster payment, and traditional credit card entry. An orange alert box notes that PayPal only handles transaction facilitation, emphasizing its role in secure transactions

PSPs are the middleman between customer bank accounts and payment methods (like Visa or Paypal). They facilitate the payment transaction, and take a fee for this. 

PSPs do not serve as the legal seller nor do they assist with various other financial responsibilities shown in the table above.   

Examples of PSPs:

Stripe, Nuvei, Checkout.com, Adyen 

What you get with a PSP 

Payment processing: The core function of a PSP is the technology to accept various payment methods, process payments, and connect to the banking network.

Fraud Protection [for additional cost]: Some PSPs will give the option to pay for fraud protection in addition to payment processing. 

Chargebacks and disputes [for additional cost]: Chargebacks are a real financial and time burden for merchants. Some PSPs will offer a service to handle chargebacks for an additional fee.

What kind of gaming company should use a PSP? 

Choosing a PSP instead of an MoR makes sense if your game is heavily focused on one market, and therefore doesn’t need to pay fees for international coverage and global tax compliance. Such companies can still supplement the core payment processing functionality of a PSP with additional features like fraud protection and chargeback support, for extra fees. 

Another scenario in which a PSP might make most sense is when publishers have already built their own D2C ecosystems, with in-house finance specialists. They might need only the payment processing technology of a PSP and not the whole payment operations stack of an MoR. 

What is a Merchant of Record?

Screenshot of a mobile game purchase screen from 'Space Race', featuring a 'Welcome Offer' for $19.90. The offer includes 100,000,000,000 coins, 2 gems, and 2 potions displayed on a vibrant purple and space-themed background. Multiple payment options are shown including Apple Pay, PayPal, and various credit cards. The screen is part of a user interface design, highlighting an interactive and streamlined checkout process

A Merchant of Record is a holistic, one-stop solution for your D2C payments.

Your MoR acts as the seller of record in transactions, assuming full financial liability for transactions, including taxes, chargebacks, and refunds. 

Examples of general MoR companies:

  • Fast Spring
  • Reach 

Examples of gaming-focused MoR companies:

  • Appcharge 
  • Xsolla

What you get with an MOR

Payment processing – An MoR will integrate and maintain multiple B2B payment processors or payment service providers to facilitate payment routing and cascading, reducing the risk of payments being mistakenly declined as fraudulent and resulting in lost revenue.

Fraud protection – An MoR will offer detection of fraudulent orders, manual review of suspicious orders, and custom rules to protect your business.

Merchant Accounts – An MoR will set up multiple merchant bank accounts in countries where you have a significant customer base, enabling you to accept global payments.

Disputes and refunds – An MoR handles payment reconciliation, refunds, and chargebacks, ensuring a smooth process for both you and your customers.

Local entity creation – An MoR will set up local business entities to facilitate merchant accounts, tax registration, payment relationships, and more. 

Currency conversion – To reduce any friction from the user’s payment experience, an MoR will automatically convert the prices to local currencies.

Tax compliance – An MoR will calculate, file, and remit software sales tax in the locations your customers reside in, ensuring compliance with local regulations.

All of these things are required to power global D2C sales – the decision is whether you want to outsource everything to an MoR, or combine a PSP (with limited add-ons) with in-house specialists. 

What kind of gaming company should use an MoR? 

4 6

Publishers selling D2C web store items to a global market, who would rather outsource the complexities this entails to a trusted partner instead of hiring finance teams in-house.    

Merchant of Record vs. Payment Service Provider: Which Option is Best For Mobile Game Publishers?

The boring answer is that it depends. Both options offer varying benefits, but the choice relies heavily on your company’s specific needs, the extent of your global market reach, and how much of the financial and legal responsibilities you’re willing to manage in-house.

We’ll take this moment before you go to mention that we offer gaming-specialized MoR services that are battle-tested with some of the world’s biggest publishers. Should you wish to get in touch to learn more, you can book a demo via our homepage.

Mobile Game Web Stores: Should You Build or Buy Your Tech?

In 2023, nearly every major mobile games publisher launched a web store. There’s a reason for this: by carving out a direct-to-consumer sales platform, publishers bypass the traditional 30% fees on all transactions. In doing so, they can provide users with exclusive and generous offers while significantly increasing profit margins. 

It’s a much-needed win for publishers, who are feeling the squeeze due to challenging industry trends, and it’s also a win for players, who receive far more value for their money in the offers presented to them in web stores. 

With these tailwinds, we expect to see a surge in web store adoption in 2024 from both medium and large sized publishers. Which begs the question: how do you actually create a web store?

There are two key components: creating a functional store, and handling the payment operations to enable global sales.

To do this, you can either build out your web store and its payment operations in-house, use a white label, out-of-the-box web store platform to do everything, or use a combination of both (for example, developing your own store but outsourcing your payment needs to a web store platform). 

By the end of this guide, you’ll understand the pros and cons of these approaches and be a step closer to executing your game’s web store.

Let’s dive in. 

What’s behind a successful mobile game web store?

A blurred background with vibrant shapes highlights a checklist for a successful mobile game web store. Key points include a robust Merchant of Record infrastructure for payments, captivating design and fun user experience, gamification mechanics, regular updates to offers and events, resources for frequent new content testing, and behavior-based player segmentation

The list shown above demonstrates just some of the key components of a mobile game web store. 

With this in mind, let’s take a look at the pros and cons of building a web store in-house from scratch, before looking at the alternative approach – leveraging a white-label platform where the tech is already taken care of.  

Building your own game web store from scratch

The pros of building your own web store

Full autonomy

Building a web store in-house means your tech and tools belong solely to your company. You’ll always be in full control, eliminating any risks posed by the reliance on a third-party vendor, and keeping communication internal – especially useful if you have a big team. 

In addition, your web store will become part of your studio’s core technology stack, adding value to your company.

Complete customization

When you have a team of in-house engineers and product designers building your web store from scratch, you’re able to mold your store whatever way you’d like to meet the specific needs of your game. 

That’s an attractive proposition for many developers, but it comes with a cost. Dedicating a team to not only take a web store from 0 to 1 but then maintain and customize it constantly once it’s live is a major commitment, both in time and money. 

Higher margins on sales

White label web store solutions take anywhere from 5% to 15% per transaction. While still a far cry from the traditional platforms’ 30% cut, some developers may deem it worth the investment to avoid fees altogether by building their web store in-house.

This means they can pocket the highest possible margins per transaction. However, that must be weighed against the considerable cost of hiring a dedicated team of engineers and product designers to build and manage the store. 

The cons of building your own web store

It’s expensive and time-consuming 

Some studios with enough manpower can put together a team from their existing workforce to at least build an MVP of a web store. 

But to build a robust web store, equipped with all the functionality and features that keep players coming back and making repeat purchases, you’ll need to hire a team of specialist engineers and product designers. 

We’ve seen large publishers dedicate 10 to 15 people to building a web store. Not only is it a lengthy process to hire the right people, but once you have them it also takes considerable time to build and launch the store. That’s expensive – both in time and in money. 

Being your own Merchant of Record is a headache

When you start selling to players outside of the traditional App Stores, which take care of all Merchant of Record services as part of their 30% cut, you take on this responsibility for facilitating global payments.

Becoming your own Merchant of Record means hiring experts to handle local taxes, currencies, exchange rates, invoicing, billing and fraud prevention. This newfound responsibility also introduces the risk of exceeding chargeback limits, potentially resulting in penalties or even the blocking of your game by payment providers.

If you want to build your web store in-house but feel overwhelmed by the idea of managing these financial intricacies, opting for a gaming-focused MOR provider can make a lot of sense [holistic web store platforms like Appcharge offer both an MOR solution and a web store builder].

Maintenance and management is an ongoing burden

A successful web store isn’t completed once it’s been launched. Just like a mobile game, it is a living, breathing entity that requires constant iteration and optimization. 

If you build your web store internally, every change to your web store – from new artwork to new gamification mechanics – will require development work. Ultimately, this slows down your time-to-market for every iteration and creates operational overheads.

Building your own web store: a brief summary

Building your D2C web store in-house gives you the ownership, control, customization, and margins per transaction to make top-grossing games. 

Whether this is the best route for your company really depends on your team size, expertise, financial resources, and capacity to execute with speed and quality.

The challenge? 

Well, you’re looking at a minimum of five highly-skilled (and very expensive) software engineers just to get you started. 

Once you’ve found them, they need to become closely intertwined with the game development, LiveOps, and game monetization teams, ensuring that as new features, events, and offers are added to the game and product roadmap, the web store is able to support these initiatives simultaneously. 

All the while, you need to ensure all of this effort is supported by robust Merchant of Record services to handle the complex world of payments. 

Using a white-label web store for your mobile game

A digital payment interface featuring a credit card mockup with the text 'Pay $12.99' on a button. In the background, a smartphone displays a treasure chest graphic, symbolizing an in-app purchase. To the right, currency symbols for Euro and Dollar are visible, suggesting international payment options. The backdrop is a muted gray, with a snippet of code visible on a secondary device, indicating technical backend processes.

Using a white-label platform, instead of developing your own technology, is a more efficient way to build out your mobile game web store. But is more efficient actually better? Let’s see.

The pros of using web store tech for your game

When chosen smartly, ready-made and purpose-built web store technology can supercharge your mobile game’s bottom line profit. Let’s take a look at four of the top reasons why.

Maximize your profits

Hiring a team of specialist engineers and product designers to develop just a ‘vanilla’ or MVP version of your web store can take around 4 months and is expensive.

Fortunately, in the same way you can bypass the traditional app stores’ 30% fees by launching a web store, you can also bypass the aforementioned development costs by leveraging an out-of-the-box platform, which has done all the heavy-lifting for you. 

Not only does this save you significant development costs, but it expedites your time to market so you can start selling items faster. More on that below.

Faster time-to-market

With a seamless API integration using a white label platform, you can get a web store to market in a matter of weeks. One based on battle-tested technology and with all the features you need to succeed. Compare that to the time it takes to actually begin earning from an internally built web store – remember you need to assemble a team of specialists, develop a platform, and ship it – you’re saving a huge amount of time. And time is money.   

Payments taken care of

Payment infrastructure is one of the biggest headaches faced by publishers who opt to build web stores in-house. A white-label web store platform like Appcharge handles all of your Merchant of Record needs, which is a game-changer for any company facing down the prospect of hiring experts to handle local taxes, currencies, exchange rates, invoicing, billing, chargebacks, and fraud prevention. 

Easy updates and optimization

The right white-label web store platform makes it easy to update your store with new designs, art work, gamification mechanics, special offers, and more. 

Given that most games these days operate as live services with dynamic LiveOps and frequent optimization, it’s crucial that you can update your web store frequently and without unnecessary hassle to keep up with this cadence.   

Build or buy: A big decision for your mobile game monetization

An e-commerce web page mockup showcasing in-game currency purchase options. The display features cards with gold coins for $3.00, a pink gem for $2.90, a green gem for $1.90, and a treasure chest for $4.00. Above, a user interface shows a balance of 80 purple gems and 20 gold shields with an exchange rate, set against a muted gray background with a color palette selection tool at the bottom

The allure of ownership and control, customization, and higher margins per transaction may tempt some publishers to build a web store in-house. Some might opt for developing the store only and outsourcing the MOR part, to alleviate some of the burden. Others might decide to keep the whole thing in-house, from payments to store development. Either way, the required investment in time, effort, and resources is considerable. 

On the other side of the spectrum, a holistic white-label web store platform allows game developers to build a robust web store with all its payments and MOR needs taken care of in a matter of weeks. This speed-to-market, both for launching and for adding new features in the future, is invaluable.

Equally crucial, outsourcing helps to maximize profits by avoiding hefty development costs, with platforms like Appcharge charging just a 5% fee per transaction. 

Another important advantage of working with a web store platform is leveraging their expertise, so you can always stay at the forefront of D2C innovation and ensure your strategy is guided by specialists.

If you’re curious what to look for when choosing the right web store platform, this article should be helpful.

From Code to Checkout: Tackling the Top 5 Challenges in Crafting Your Game’s Web Store

By now, it’s no secret that a web store is the golden ticket to catapulting your mobile game revenue into the stratosphere. But the path to building a successful web store is riddled with challenges, requiring a strategic combination of skilled professionals and a carefully allocated budget. 

Game developers often plunge into this venture unaware of the intricacies, only to find themselves tumbling down the rabbit hole of unforeseen costs and missed deadlines. Here’s our top list of challenges to take into consideration before you start building a web store from scratch, to ensure you’re well-prepared for the complexities that lie ahead.

1. Assembling your team

Sure, assembling a team seems like a breeze: after all, your game studio is teeming with superstar developers, product managers, designers, and analysts. But how web-savvy are they? Proficient in game app development, your team might lack the expertise required for the intricate task of building a web store.

Moreover, as a game developer, you’ll probably want to prioritize… well, game development goals, reserving your best talents for the game, and leaving a junior team grappling with a sizeable project. Balancing your team’s skill set is crucial to the success of your web store venture.

2. Doubling your effort (and then some)

Building a web store is not a one-off event; it’s an ongoing endeavor. Unfortunately, we often see gaming companies launch a basic web store only to let it gather dust due to the costs of maintenance. Ensuring the commitment of your entire team, from marketing to LiveOps, increases the workload for everyone involved in terms of development as well as maintenance, but is also essential.

3. Being your own Merchant of Record

Launching a direct-to-player platform and avoiding the usual 30% transaction fees is (oh so) enticing, but what does it mean to handle your own transactions? How expensive is it? In case you decided to build both a web store and a checkout system, you are now not only delving into the web development sphere, but also embarking on a journey into the complex world of payments.

Becoming your own Merchant of Record means grappling with local taxes, currencies, exchange rates, invoicing, billing and fraud prevention. This newfound responsibility introduces the risk of exceeding chargeback limits, potentially resulting in penalties or even the blocking of your game by payment providers. If managing these financial intricacies seems overwhelming, opting for a third-party payment solution is a prudent choice.

4. Getting players to your store 

Bringing players to your store is a challenge in itself. Due to legal constraints, advertising your store within your game is impossible. You’ll need a creative approach to user acquisition, including retargeting campaigns, direct messaging your whales, and leveraging online communities on platforms like Facebook, Instagram, or Discord, depending on where your audience is.

Training your community and account managers to navigate this uncharted territory is essential. Opting for an out-of-the-box store via a dedicated platform can be helpful, as the supplier can offer best practices and insights based on player behavior patterns across the industry. While you’re at it, be sure to also ask them for business strategy recommendations regarding which monetization tools are best to use for your particular game.

5. Keeping up with industry trends 

The gaming industry moves at breakneck speed. New monetization tools emerge daily, promising unprecedented revenue increases. Amidst the daily grind of game maintenance, player management, and team oversight, keeping pace with these innovations becomes a formidable task. Developing and introducing new web store monetization tools to your audience requires vigilance, dedication, and of course, a substantial part of your budget.

Embarking on the journey of building a web store is undoubtedly an ambitious undertaking. But with meticulous planning, the right team, a decent budget and a clear understanding of the challenges, you can transform this endeavor into a lucrative opportunity for your game. 

Explore plug-and-play web store solutions that minimize hassle while boosting revenue

Play it Safe: The Appcharge Approach to Risk Mitigation

As game developers, we pour our hearts and souls into creating captivating experiences, while the risk of fraud and fraudulent chargebacks is always lurking in the shadows. The need for a robust risk mitigation strategy has never been more crucial.

In this article, we’ll delve into why risk mitigation is paramount for mobile game developers and explore how the Appcharge platform empowers you to safeguard your transactions effectively.

Appcharge’s Fraud Score

At the heart of Appcharge’s risk mitigation strategy lies the Fraud Score. Every transaction passing through our platform is meticulously evaluated and assigned a fraud score. This score serves as an initial assessment of the transaction’s risk level.

But how is this score calculated? It’s a blend of cutting-edge algorithms and historical data analysis. We consider various factors, such as transaction history, user behavior, and payment method, to assign a score that reflects the likelihood of fraudulent activity.

Transactions with high fraud scores aren’t dismissed outright. Instead, they are flagged for further review. We understand that false positives can be costly, so our approach is not overly cautious. Instead, it’s calculated and precise.

In our commitment to excellence, Appcharge collaborates with third-party anti-fraud software of the highest standards. This partnership ensures that our fraud detection capabilities are at the forefront of industry security. Your peace of mind is our priority.

Blacklisting Serial Fraudsters

At Appcharge, we have zero tolerance for serial fraudsters. Our platform blacklists individuals with a history of fraudulent activities across all games, creating a robust shield against repeat offenders.

Machine Learning Customization

Our machine learning capabilities allow you to define custom rules based on your unique business goals. Alternatively, you can opt for our recommended optimal settings, harnessing the power of AI to protect your transactions.

Optimized Manual Review

Appcharge streamlines the manual review process. We provide a centralized view of all flagged transactions, accompanied by rich contextual data explaining why each transaction was flagged for review. This ensures that your team can efficiently evaluate and address any concerns.

Extra Authentication for High-Risk Transactions

We understand the delicate balance between security and user experience. Appcharge applies extra authentication measures to high-risk transactions, without compromising your conversion rates. This targeted approach ensures that only transactions with elevated risk receive additional scrutiny.

Multiple Payment Methods

An e-commerce checkout interface on a mobile device screen, with an option to purchase an 'Amethyst Crystal' for $12.99. Multiple payment methods including Apple Pay and credit cards are visible. The user's information is pre-filled, ready for purchase. The background is a vibrant orange with a Euro currency symbol on one side and a Dollar sign on the other, indicating multi-currency support. Snippets of code in the background suggest a secure and programmable payment gateway.

Offering multiple payment methods minimizes risk by adding layers of security and verification, making it harder for fraudsters to exploit vulnerabilities. Digital wallets require extra customer verification, such as biometrics or passcodes, while bank debits add an additional layer of security by verifying account ownership.

By providing these secure payment options, Appcharge ensures not only a smooth user experience but also a significant reduction in the risk of fraud, safeguarding both your revenue and player trust.

Chargeback Fraud: Navigating the Storm

Chargebacks can be costly, both financially and in terms of reputation. If your business loses a dispute, you could be liable for more than just the original transaction amount. Here’s how to handle chargeback disputes:

Customer-Centric Approach: When a dispute arises, it is recommended you proactively reach out to the customer, aiming to resolve the issue amicably.

Submitting Evidence: Timeliness is key. While reaching out to the customer for resolution, it’s crucial to also submit evidence within the required timeframe to prevent default wins for the other party.

Card Issuer’s Decision: It’s essential to note that Appcharge doesn’t make the final call on dispute outcomes. Card issuers have the authority to decide. We play our part by confirming that the evidence submitted meets requirements and promptly communicate the decision to you through our dashboard, webhooks, and API.

Appcharge’s multifaceted approach, encompassing advanced fraud detection mechanisms, efficient chargeback management, and the provision of secure payment choices, empowers developers with invaluable defenses against the evolving landscape of mobile gaming risks.

Understanding and implementing these strategies ensures that developers can forge ahead in their creative endeavors, fortified by the knowledge that Appcharge is a trusted partner in their journey.

Why Web Stores Offer a Better Deal For Your Mobile Game VIPs

We’ve already spoken about the $30 billion+ opportunity in the mobile games market. According to data.ai’s State of Mobile report, the sector generated $110 billion from player spending on in-app purchases in 2022. But due to the hefty 30% revenue share taken by Apple and Google, publishers saw ‘just’ $77 billion of that—the rest was scooped up by the platform holders.

Much of this revenue, of course, comes from the minority of players, your VIPs. But the App Store and Google Play make engaging with these players and providing them with deals more challenging than it should be—and they, of course, take that 30% fee.

That’s where an off-app payment system, or web store, can come in. Not only can this provide a much fairer deal for publishers—Appcharge, for example, takes just a 5% fee for powering transactions—but one of the biggest opportunities they offer is catering to those VIPs.

Community-Building

VIP users are the most engaged and highest spending players in your game. Ensuring a good experience, where they feel they are getting the appropriate rewards and perks for their investments, not only helps your title be successful, but can act as a reflection to how the wider player base feels about your game.

One of the best ways to do this (aside from in-game options such as clans, leaderboards, competitions, and various multiplayer modes) is to build your community outside of the app and onto platforms such as Discord, social media and even a dedicated website. These platforms let you engage with your players—and your VIPs—in ways that the App Store and Google Play don’t let you.

Through Discord, you can promote exclusive web store bundles, promote events with special giveaways available only out of the game, communicate directly with your players in a two-way conversation, and obtain direct feedback on specific features, updates, and what your players want to see most in the game. On Twitch, not only can the streaming platform help promote your title, it’s another way to share content and also promote exclusive web store offers. The same goes for social media—you’re meeting players where they are, while also having a platform to offer them the best deals, which you can’t do on closed mobile ecosystems.

It’s in these communities that you can build closer relationships with your highest spending players. Depending on your strategy, you could potentially communicate with players out of the game and through chatbots on Facebook, or via email marketing integration, to promote the latest and best deals. You could even offer limited-time discounts, bundles or even early access to new features, all through a web store that offers a better deal. By creating a direct-to-player monetization strategy, developers can increase their revenue and build a loyal fanbase outside of the restrictive app stores, rather than having to go through them.

Personalized Offers

A web store can work in tandem with your community strategy, particularly when it comes to VIPs. For starters, you have total control on the deals you can provide players and which price points to choose—and you are not at the mercy of any potential future policy changes by Apple or Google. This means you can provide better offers for players, who can get more bang for their buck when publishers don’t have to account for the 30% revenue share with platform holders.

For VIPs, you can offer a special loyalty program with better rates than in the app. What’s more, by powering your direct-to-consumer sales on Appcharge, you can segment your most important users and surface deals most appropriate to them. These deals can be personalized even to specific individuals, based on how they engage with the game and their current progress, and this entire process can be automated.

To attract players to actually engage with your web store, however, is no simple task. Many purchases in-game are made emotionally, an experience that is extremely challenging to replicate out of the app. That’s why building a community is important, and engaging with your top players to showcase the better deals on offer from your own store. The experience can also be improved by ‘gamifying’ the web store, making it look and feel similar to what players see in-game.

With Appcharge, developers can automate user segmentation, enabling them to create custom rules based on player behaviour, game progression, spending levels and habits, the country they live in, and preferred payment methods.

This personalization means developers can create and surface the most relevant offers to players, helping to increase conversion, and therefore revenue. And this all happens in an environment where publishers can take 95% of the revenue, not just 70%.

A Fairer Deal

Web stores have the potential to be much more than a way to obtain a better revenue share than mobile platform holders currently provide. They can play a key role in keeping VIPs happy and engaged with your game, ensuring they get the best and most relevant deals for their money, a process made easier by having a web store you control and generate higher returns from. By building communities out-of-app, publishers are able to go direct to players, build better relationships, and provide the most value.

Google Play Proposes Third-Party Payments in the UK – But is it a Good Deal for Developers?

Google has proposed opening up the Google Play store to third-party payment systems in the UK in a move that would see it take a reduced revenue share. But all is not as it seems.

The proposal, if enacted, would enable developers who provide options for both Google Pay and alternative billing to have Google’s revenue cut reduced by 4% to a 26% share (or 11% on their first $1 million)—if users pay through a different payment service provider (PSP). However, if developers do not offer Google Pay as an option, they will be penalised and the standard platform fee would only be cut by 3% to 27% (or 12% on their first $1 million). 

Should users choose to pay with Google Pay, the revenue share will remain at a 70/30 split.

The changes would be rolled out for non-gaming apps first, before eventually allowing games developers to be eligible for the new billing rates and options “no later than October 2023”.

Google claims this would help ensure a “smooth transition for developers and to allow for the necessary changes to be made to our systems”. For context: In Q1 2023, data.ai estimates a large majority of worldwide consumer spending on Google Play came from the games category. It’s effectively a cash cow that is often treated differently by mobile platform holders than other categories.

The proposed changes would only impact in-app purchases in the UK, though similar actions have been taken in other countries.

Why Proposes Third-Party Payments Now?

Google’s announcement comes in response to an investigation by the UK’s Competition and Markets Authority (CMA), which began in June 2022, to look into “suspected anti-competitive conduct” by the tech giant. A particular focus of the ongoing investigation concerns Google Play’s rules which “oblige app developers offering digital content to use Google Play’s own billing system for in-app purchases”.

In response, on April 19, 2023, Google outlined the above changes to its rules and the CMA has now opened a call for feedback on the proposals. Public consultation on the new commitments will run until May 19, 2023. Following the end of the investigation and feedback from the public, the CMA will decide whether to accept or reject the changes.

At present, the CMA’s position is that it believes the new commitments from Google are “sufficient to address the competition concerns”. While no final decision has been made, pending consultation, the CMA has proposed to accept the changes.

What Do the Changes Really Mean?

Any climbdown from the standard 30% revenue share should be considered significant, as Apple and Google fight tooth and nail to retain the status quo. This latest proposal is another example of platform holders making as small a concession as possible to retain their lucrative cash cows.

But while it may seem like a concession, for developers, the reality is that it will not make a notable difference to their businesses on the current terms. A reduction of 3% to 4% will not cover the costs of using an alternative billing system, where the revenue share is often 5% or more (AppCharge takes a 5% cut per transaction).

PSPs charge such fees to cover the costs of billing, invoicing, fraud, chargeback cover, etc. Such a small reduction in Google’s share means that, should customers use another payment system, it would actually cost developers a greater share of their revenue, not reduce it.

Google has claimed that such a reduction is enough to cover developers’ “average payment processing costs” while also leaving a margin for customer support and other payment processing services. 

These terms mean that Google Pay keeps its position as the preferential payment method, while creating a challenging environment for alternative options. And of course, in any event, Google will continue to maintain its standard 30% share on all Google Pay transactions, thus effectively retaining the status quo. Of course, if you’d like to discuss potential alternative PSPs for an both in-app and out-of-app solution, you can speak to the AppCharge team.

Rick VanMeter, executive director of advocacy group The Coalition for App Fairness, which champions app store reform, told TechCrunch he believes the proposals would enable Google to “continue taking a massive cut on services they do not even provide”. He added: “This solution will not create meaningful competition and is a bad deal for developers and consumers.”

It remains to be seen whether the CMA will ultimately accept or reject Google’s proposals, and what the future of third-party payments will look like on the marketplace in the UK.

Regulatory Pressure

Apple and Google have both come under increasing pressure around the world over concerns about anti-competitive practices, namely over the exclusive use of their own payment systems in their app stores. 

Google was hit with a $162 million fine by the Competition Commission of India over anti-competitive practices in October 2022. Following this, as part of efforts to appease the regulator, Google announced in February 2023 that it would support third-party billing systems on Google Play in the country, reducing its fee by 4% for transactions made through alternative payment services.

It had previously introduced a similar measure in South Korea, following strong regulatory pressure and criticism. A smaller reduction of 3% in its fees for purchases made through other PSPs has also been enacted in the European Economic Area (EEA).

The UK proposal is now following suit with its previous successful negotiations with regulators.

Out-of-App Solutions

While it’s a positive step for Google to introduce alternative billing systems on its UK Play store, the current proposals aren’t a particularly attractive proposition. For developers really looking to take advantage of the $30 billion opportunity in the mobile games market – which is the amount of revenue the App Store and Google Play took last year from in-app purchases – the best solution still remains in utilising web stores.

By bringing your community of players to a web store, developers can offer better deals to players, all while retaining a higher share of revenue. Regulators continue to chip away at the app store monopolies, but the industry is a long way off from a fairer deal for all.

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