What Are In-App Purchases

Controversial, for starters.

Apple and Google’s rules around in-app purchases are, let’s say, hotly debated. Every transaction through the Apple App Store and Google Play Store is subject to a not insubstantial service fee — 30% (or 15% for developers whose apps transact less than $1M annually). Unsurprisingly, that means most (uh, all?) developers and businesses don’t want these transactions to pass through either app stores’ billing system.

Understanding what should and shouldn’t be an in-app purchase can mean the difference between building a maximally profitable payment system for you and one that’s maximally profitable for Apple and Google (Google alone is estimated to have collected nearly $12M in 2020 from in-app purchases). Plus, having the appropriate payment system(s) in place can help to ensure your app breezes through infamously capricious app store review processes.

So, Really — What Are In-App Purchases?

You might think an “in-app purchase” (or an IAP) occurs every time you buy something in an app. And that’d be a pretty good guess, but that’s not quite how it works. Examples of products purchasable via IAP include Duolingo’s Lingot currency, Tinder’s Tinder Gold subscription plan, and Amazon’s Kindle ebooks (or, they would be, if Amazon hadn’t removed their users’ ability to purchase them in protest).

You might’ve noticed that all of those are digital products. What about physical goods and services? If you purchase them in an app, are they IAPs too?

You should be pleasantly surprised to hear that they’re not! The “in-app” in “in-app purchase” isn’t just describing where you buy a thing. It’s describing where you use it. IAPs are for purchasing digital goods and services that stay in the app where you bought them. You can’t use a Lingot to buy a Tinder Gold subscription. 

This all means you can’t make clothes, food, Uber rides, and other “real world” goods and services purchasable with IAPs.

Do You Always Have to Use IAPs for Digital Products?

This isn’t to say the distinction between appropriate payment methods is always clear. You can make certain digital products purchasable by means other than IAP. For example, Apple’s App Store Review Guidelines make an exception for “Hardware-Specific Content.” 

“In limited circumstances, such as when features are dependent upon specific hardware to function, the app may unlock that functionality without using in-app purchase (e.g. an astronomy app that adds features when synced with a telescope). App features that work in combination with an approved physical product (such as a toy) on an optional basis may unlock functionality without using in-app purchase, provided that an in-app purchase option is available as well. You may not, however, require users to purchase unrelated products or engage in advertising or marketing activities to unlock app functionality.”

– App Store Review Guidelines

If Tinder did let you use Lingots to buy Tinder Gold, would that mean Duolingo could offer other payment methods for Lingots in their own app? It’s possible! In fact, many developers and businesses build multiple versions of their apps incorporating backup payment systems just in case their first choice is rejected by the App Store or Google Play. 

Clearly, payments can get complex (and we haven’t even talked about credit cards, foreign currency, and PCI compliance). It’s always a safe bet to assume you need to use IAPs if your product is digital and that you can use other payment methods if it’s real.  

Just remember, the Onymos Payments feature has you covered no matter which way you need to pay — it’s integrated with Apple Pay, Google Pay, PayPal, and Stripe. With Onymos Payments, you and your developers can focus on building your product, not how your customers pay for it.