In-App Purchase
Overview
In-App Purchase (IAP) refers to the payment method used to buy digital content, subscriptions, game items, and similar goods inside mobile apps or digital platforms. App markets such as Apple App Store and Google Play are the most representative examples, and IAP sits at the center of regulation and litigation due to issues of platform fees and mandatory payment systems.
Key Details
Concept and Types
In-app purchase broadly refers to e-commerce transactions that occur inside an app. It is largely divided into consumables (in-game currency, coins), non-consumables (ad removal, feature unlocking), and auto-renewing subscriptions (OTT, music, productivity apps). Payments are processed through the app market's payment API, and receipt verification and server-side verification are essential.
App Market Fee Structure
Apple and Google have traditionally charged a 30% fee on digital goods transactions. Developers with annual revenue of $1 million or less are subject to a 15% small business rate. For subscriptions, the common structure is 30% in the first year, lowered to 15% from the second year onward. These fees are defended as the cost of maintaining the app ecosystem, while critics call them monopolistic rents.
Mandatory Payment and Regulation
The "mandatory in-app payment" practice, in which app markets allow only their own payment systems, is a core regulatory issue in many countries. In 2021, South Korea amended the Telecommunications Business Act to prohibit app market operators from forcing a specific payment method. Since then, Google has introduced alternative in-app payment (with a 4 percentage point fee reduction), and Apple has allowed external payment links. The EU has mandated alternative app stores and external payments through the Digital Markets Act (DMA), and in the United States, the Epic Games v. Google case produced a jury verdict and injunction, increasing pressure to open up platforms.
Technical Implementation
In-app purchase implementation follows the sequence of calling the client SDK, issuing a payment receipt, server verification, and delivery of goods. Major challenges include refund and cancellation handling, fraudulent payment detection, subscription status synchronization, family sharing, and protection of minors' payments. Recently, hybrid models linking external app market payments with web payments have been increasing.
Impact and Issues
In-app purchase fees directly affect the profitability of small and medium-sized developers and content businesses. Games, webtoons, music, and subscription services are highly dependent on platforms and continue to demand lower fees and permission for external payments. Platforms, meanwhile, argue that fees are necessary to cover payment security, review, refunds, and customer support costs. From the consumer side, refund procedures, price discrimination, and auto-renewal notification issues are key concerns.
Latest Trends
In 2024-2025, the in-app purchase market is rapidly being reshaped by regulation. With the implementation of the EU DMA, Apple has allowed alternative app stores and external payments in Europe and introduced the Core Technology Fee (CTF), while Google has expanded user-choice billing. In the United States, following the Epic Games v. Google ruling, demands continued for alternative payments and app store openness on Google Play, and Apple responded by allowing external payment links in the U.S. while charging a separate fee. In South Korea, controversy continues over fee levels and effectiveness as alternative payments take root after the law banning mandatory in-app payment. Japan enacted the Mobile Software Competition Act in 2024 and is preparing for enforcement in 2025, while the United Kingdom, Australia, and others are conducting app market competition investigations. Technologically, new forms such as the spread of the subscription economy, web payment integration, and NFT/digital asset payments are emerging.
Related Topics
- [[App Store]]
- [[Google Play]]
- [[Apple App Store]]
- [[Digital Markets Act]]
- [[Epic Games v. Google]]
- [[Platform Fees]]
- [[Subscription Economy]]
- [[Telecommunications Business Act]]