Which payment providers did Apple approve for alternative in-app payments in Korea?

Apple listed KCP, Inicis, Toss and NICE as qualified payment service providers for apps distributed in Korea. The alternative payment option applied to apps available on Apple’s App Store solely in Korea.

Why did Korean app developers criticize Apple’s 26 percent commission for third-party payments?

Developers using an alternative payment provider would still owe Apple a 26 percent commission and also pay fees to the payment provider or credit card firms. One developer said Apple was virtually forcing developers to use its own billing system.

What did Korea’s communications regulator say it would examine about Apple’s alternative payment system?

The Korea Communications Commission said it had asked Apple to explain its statement that it could not assist users who paid through an alternative method. The commission said it would check whether Apple discriminated against developers using third-party payment systems.

Apple criticized for exploiting loophole in Korea's in-app payment regulations

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Summary

Apple said Thursday that apps distributed on its App Store solely in Korea could offer alternative in-app payment options, but its conditions drew criticism from developers. Apple required developers using third-party payments to warn customers that Apple would not assist with refunds, purchase history or subscription management, and it would charge a 26 percent commission. Developers said additional fees from payment providers or credit card firms could make alternative payments more expensive overall.

Key Facts

Apple named KCP, Inicis, Toss and NICE as the four payment service providers qualified to process payments for apps distributed in Korea.
Apple’s commission for third-party payment transactions was 26 percent, compared with 30 percent for its own billing system.
A Korea Communications Commission official said regulators had asked Apple to explain its customer-support warning and would check whether the company discriminated against developers using third-party payment systems.
Apple did not say whether developers could direct users to external payment systems, which would avoid Apple’s transaction commission.

By Park Jae-hyuk

Published Jul 1, 2022 4:18 pm KST
Updated Jul 2, 2022 9:52 am KST

An Apple logo hangs above the entrance to an Apple store in New York in this 2015 file photo. Reuters-Yonhap

By Park Jae-hyuk

Apple has drawn criticism from app developers for essentially forcing them to use its own billing system instead of clearly offering multiple options. Korean law mandates that apps distributed by app market operators be allowed to offer an alternative payment processing option within their apps.

In its latest announcement, Thursday, the U.S. tech giant said that apps distributed on its App Store solely in Korea will be allowed to provide an alternative in-app payment processing option, in compliance with the Telecommunications Business Act.

This is the first time in the world that Apple will enable third-party payments for app developers.

The company listed KCP, Inicis, Toss and NICE among the four payment service providers (PSPs) qualified to provide a payment processing system for apps distributed in Korea.

However, Apple forced app developers using third-party payment options to warn customers that their apps do not support the App Store's private and secure payment system.

“Apple will not be able to assist users with refunds, the purchase history, subscription management and other issues encountered when purchasing digital goods and services through an alternative purchasing method,” the company said.

It added that apps that are granted an entitlement to use a third-party in-app payment provider will pay Apple a 26 percent commission on transactions.

Although the commission rate is lower than the 30 percent charged to app developers using Apple's own billing system, developers using alternative payment options need to pay additional commissions to PSPs or credit card firms, thereby ending up paying higher commissions overall.

“Apple is virtually forcing us to use its own billing system,” an app developer said.

Apple did not mention whether or not to allow app developers to direct their users to external systems for payment whereby they are not liable for the commission taken by the U.S. tech firm.

Google, which runs the Google Play Store for users of Android devices, is facing sharp criticism in Korea for its recent decision to remove apps on its app market if the developers of those apps direct their users to external systems for payment.

Amid the controversy, regulators emphasized that they have inspected Apple to find out whether it has violated the law of banning app market operators from forcing in-app purchases.

“We asked Apple to elaborate on its announcement that it cannot support users who download apps through an alternative payment method,” a Korea Communications Commission official said. “We will check thoroughly to find out whether the company discriminates against developers using third-party payment systems.”

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