Info-tech

Indian start-ups seek laws for app store transactions

Debangana Ghosh | | | Updated on: Aug 24, 2021

Close up of a man in blue drawing a start up sketch on a glassboard. Concept of planning and business development. | Photo Credit: ismagilov

Cite move by South Korea to rein-in Google, Apple

Indian start-ups want the government to make rules against tech giants, including Google and Apple, insisting on using specific payment gateways for transactions on their respective app stores.

“Apple App Store and Google Play Store are saying if you are selling digital goods on apps, you have to use our payment system or gateway and we will charge you 30 per cent as compared to others like Paytm, PayU or Razorpay which charge between 1.8-2 per cent as merchant discount rate (MDR). They are not giving any additional benefits or features either. It is just a like asking for money if you are having good margins, very similar to protection money in the mafia world. Because there is no law to prevent or appeal against this, it is very important that some global precedence is set so that even Indian lawmakers can look into it,” Snehil Khanor, Founder & CEO of TrulyMadly and a founding member at Alliance of Digital India Foundation (ADIF), told BusinessLine.

ADIF is a non-profit industry body that represents over 216 Indian start-ups including Paytm, Matrimony.com, MapMyIndia, GoQii Innov8, and Sheroes.

South Korea’s action

Indian start-ups point to the recent move by the National Assembly of South Korea to amend the Telecommunications Business Act aimed at countering app marketplaces from owning all in-app transactions and charging exorbitantly high commissions on all in-app purchases. Indian start-ups have come out in support of the move, calling it “a global precedence being set for even Indian lawmakers to look into it.” The amendment targets prohibiting app stores to force app developers to use a specific payment method, wrongfully delaying the evaluation or registration of apps, and unfairly deleting contents from the app market.

The Apple App Store and the Google Play Store, which control more than 95 percent of the app store market share globally through iOS and Android, respectively, have been facing flak for their practices like charging 30 per cent commission (15 per cent if annual revenue is below $1 million) on sale of digital goods or services or in-app purchases and developers being allowed to use only their payment gateways. While Apple has already been using this system, Google will be implementing the same from March 2022.

An email sent to Google for comment went unanswered at the time of publishing.

Impacting margins

For Khanor, who runs a dating app service, whose operational expenses involve spending nearly 30-40 per cent on advertising through online channels including Google and others, the additional high commission will hit his margins leaving very little for profit, he said. At present, he gets around 15 per cent of his business coming from Google’s payment gateway while the rest comes from other gateways including Paytm and PayU.

“We have to remove all other payment gateways by end of March next year. We have to give 30 per cent of our revenue to Google and Apple. In India, people are comfortable with home-grown payment gateways. Overall start-up economy will get impacted, disruption and innovations will be impacted especially for most fintech companies. For instance, earlier payments were settled by fintech companies within two days of transaction; then with increasing competition, this went down to one day. This helps the client businesses with cash flow. In contrast Google and Apple, settle payments once a month and are charging 15x versus other gateways,” Khanor added.

Sumit Agarwal, founder and CEO, of Vyapar, a book-keeping app listed on Google Play Store concurred. “Though Google Play Store helps with marketing optimisation and reaching out to more people, the downside is one day they would suddenly delist your app from the app store. Then to figure out the reason and get it fixed, there is no immediate support. This happened with us last week. When the entire business is running through such a platform, it becomes a nightmare, especially when such a thing happens without them asking for details. We wrote to them and it took a day’s time to get fixed,” he told BusinessLine.

“If Google charges 30 per cent as commissions, we will have nothing left for ourselves, especially in a country like India, where inevitably the prices have to be low for consumers to use your service. We would simply have to let go our revenue, and put up our services for free,” he added.

Published on August 23, 2021
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