Google Play Store Allows External Payments in the US, UK, and Europe

What Happened?

Google has announced that starting June 30, it will allow app developers on Google Play Store to use external payment systems in the United States, United Kingdom, and the European Union. This decision, reported by 9to5Google, comes after years of regulatory pressure and antitrust lawsuits accusing Google of abusive practices by forcing developers to use its billing system, charging commissions of up to 30%. The new policy initially applies to non-gaming apps, though it is expected to extend to other categories in the future. Google has detailed that developers must apply for approval and comply with security and transparency requirements, including submitting periodic reports on external transactions.

Why Is This Important?

This change represents a milestone in the app economy. Historically, Google has maintained tight control over payments within its store, drawing criticism from developers and regulators. The new policy allows users to choose alternative payment methods, such as credit cards directly or services like PayPal, which could lead to lower prices for consumers and higher margins for developers. However, Google will still charge a reduced commission (estimated between 4% and 11%) for using its platform, which some have criticized as insufficient. For context, in 2020 Google reduced its commission from 30% to 15% for the first $1 million in annual revenue, but fees for large developers remained high. The new commission structure for external payments varies by country: in the US, a 4% fee applies to subscription transactions and 6% for one-time purchases; in Europe, percentages are similar but may adjust according to local regulations. This represents significant savings for developers, who previously paid up to 30% in commissions. Additionally, the move could accelerate the adoption of decentralized payment systems, such as cryptocurrencies or stablecoins, though Google has not yet confirmed support.

Consequences for Developers and Users

For developers, the measure offers an opportunity to reduce costs, though they will need to integrate additional payment systems and comply with Google's requirements, which include implementing a payment method choice screen and notifying Google of each transaction. According to Sensor Tower data, non-gaming app developers generated over $10 billion in revenue on Google Play in 2022, so the potential savings are enormous. However, technical complexity and integration costs could deter small developers. For users, it may mean more payment options and potentially lower prices, but security concerns may arise when using external systems. Google has stated it will maintain security standards to protect users, though responsibility will largely fall on developers. A European Commission study indicated that app prices could drop by up to 20% if alternative payment methods are allowed, benefiting consumers. However, some experts warn that developers may not pass savings on to users, especially in markets with little competition.

Regulatory Context

Google's decision comes amid increasing regulation. In Europe, the Digital Markets Act (DMA) requires platforms to allow alternative payment methods, under threat of fines up to 10% of global revenue. In the US, lawsuits like Epic Games' have forced similar changes; indeed, Epic sued Google in 2020 for anticompetitive practices, and a federal judge ruled in 2023 that Google must allow external payment methods. This move follows Apple, which already allows external payments on the App Store under certain conditions, though with similar restrictions. Apple, for its part, charges a 27% commission in the US for external payments, which has been criticized as cosmetic. The key difference is that Google has opted for lower commissions (4-6%), which could pressure Apple to reduce its own. Additionally, in countries like India and Australia, competition authorities are investigating both companies' practices, which could lead to global changes. Google's announcement also coincides with the implementation of the DMA in the EU, which will take full effect in 2024, and the approval of the Digital Markets Act in Japan, which requires transparency in commissions.

What Should Readers Know?

Interested developers should prepare their apps to support external payments and watch for Google's terms, which include a service fee. Google has published a detailed guide in its help center specifying technical and security requirements. Users can expect to see additional payment options in apps starting June 30, though the rollout will be gradual. However, many developers may opt to keep Google's system for simplicity, so the immediate impact could be limited. In the long term, this measure could foster competition and reduce prices, but it could also fragment the payment experience. For investors, Google's decision could affect its commission revenue, which represents a significant portion of its Play Store division's income. According to Bloomberg estimates, Google Play generated over $12 billion in revenue in 2022, a large part from commissions. Fee reductions could cut this revenue by 10-15%, though Google hopes to offset it with higher transaction volume. Ultimately, this change is a step toward a more open app ecosystem, but questions remain about its implementation and real effects.