In hopes of App Store changes, Paddle develops an alternative to Apple’s payments system

Paddle, a solutions provider for subscription-based businesses, is betting on a future where App Store developers are able to use third-party payment systems — and it wants to be among the first to market with an alternative once such a system is permitted. The company today announced a new in-app purchasing (IAP) system aimed at iOS developers that’s designed to be a drop-in replacement for Apple’s own IAP. And it’s one where developers get to keep more of the revenue they earn, Paddle says.

It’s a big bet and not one that’s clear to pay off.

Paddle says its system will provide developers with access to customer data throughout their lifecycle; will offer a combination of direct subscription management and tools to pause subscriptions; and will support other payment mechanisms, like PayPal. It will also allow developers to manage their own refunds, which is something many developers have wanted for some time. Its fees would be 10% on transactions under $10 and 5% on transactions over $10. That’s less than Apple’s fees of 30% (which drop to 15% for year two of subscription-based apps, and for small businesses program and Apple News Partner program participants.)

But Paddle’s entire product hinges on its belief that the court’s ruling in the Epic v. Apple lawsuit will be held up upon appeal, and that the way Apple will interpret the ruling will allow payment system alternatives such as Paddle’s to operate. That’s not something Paddle at this point could definitively know.

In September, U.S. District Judge Yvonne Gonzalez Rogers sided with Fortnite maker Epic Games on the topic of third-party payments in the App Store in the landmark decision, though she found that Apple was not engaging in antitrust conduct. Epic, which wants to be able to also distribute its games directly to iOS users in addition to using its own payment mechanisms, said it would be appealing the court’s decision.

In the meantime, the ruling was that Apple could no longer prohibit developers from including buttons, external links and other calls to action inside their apps that could direct users to alternative payment mechanisms.

Even if this part of the judgment is not adjusted following the appeal, the judge’s wording on the matter of third-party payments is still open to interpretation by Apple. And currently, the thinking here is that it simply blocks Apple from rejecting apps pointing to other means of payment outside its store — not that Apple would have to go so far as to support a competitive payment system that’s built into the apps themselves. Experts have already pushed back on the idea this system could make it through App Review.

Paddle, however, believes it has a shot.

“Our understanding, and that of our legal advisors, is that Paddle In-App Purchase is permissible within the Apple vs Epic legal ruling,” said Paddle, in a statement. “We would welcome Apple sharing its own interpretation on this to bring further clarity to an issue that will have a significant impact on iOS developers and the wider market.”

The company plans to make its system available from December 7, 2021, in line with the court’s ruling.

Paddle today has over 3,000 software clients (sellers) using its platform for other services today, and processes billions of dollars in payment volume per year. It will be interesting to see if any developers actually go so far as to implement this Apple IAP alternative, which could risk having their apps rejected from the App Store. So far, Paddle says some devs have agreed to try it, including MacPaw.