Break Apple’s Monopoly: Open App Payments Now

Written by on April 9, 2013 in BillingViews, Opinion with 0 Comments

I wanted to buy a cake for my little girl and Apple wouldn’t let me. Its failure left my daughter disappointed, me cursing Apple, and cost Apple’s ecosystem partner – the app developer – an in-app sale. Apple’s monopolistic choke hold over the mobile ecosystem needs to be seen as a brewing anti-trust issue and stopped.

Nothing gives me more joy than making my daughter happy. So when she asked me to unlock different color frosting on her dessert-making app, I was pleased to do it for her. The problem was, Apple told me my zip code didn’t match my card provider’s records, so my transaction wouldn’t go through. I realize that this is a security mechanism meant to protect my interests. But this simple data discrepancy occurred because Apple has no awareness of who I am as its customer. I recently moved and despite the fact that the bill I pay for my iPhone goes to my new zip, Apple was out of loop. Apple also pushes the burden on me, the customer, to keep my records up to date – but requires me to do it through my PC. I couldn’t update my zip from the mobile device in the flow of the purchase. For a company that prides itself on customer experience, that’s a joke. If I were an app developer, I’d be fomenting revolution among my peers and excoriating Apple for fleecing me on fees while costing me sales with its obsolete payment process.

As much as I like Apple’s technology, I resent its barbaric choke hold on payments. Its approach favors no one but Apple. The company has zero awareness of me as a customer. It offers me nothing for my patronage. Worse, it uses its market power to limit customer choice, take money out of its app developers’ pockets, and push ham handed payments processes on everyone involved. This is the big problem with closed ecosystems; they use market power in one area – like devices or operating systems – to exert control over other areas, namely eCommerce. That’s not only anti-competitive, it’s monopolistic.

Recently, I wrote about how Pandora‘s service suffers because it does a poor job of monetizing impulse buys. But looking deeper, I can see how Apple plays a role. Pandora is held hostage on the payment side. Its service would benefit from direct operator billing, but Apple doesn’t allow its developers to step outside of its payments infrastructure. So, Pandora suffers and perhaps limits its offerings to unappealing monthly subscriptions because Apple’s fees make it unprofitable to do anything else.

This needs to change. While I’m not typically a fan of regulatory interference, I think this is an emerging anti-trust issue that regulators should tackle. Looking forward, consumers should be able to choose which eWallet they want to run purchases through. no matter who the retailer, payments processor, or middle-men might be. Apple, Google, or anyone else should not have a right to dictate payment choice. App developers should be able to control their payments flows if they wish, especially because payment process flow is such a critical determining factor in whether a potential customer actually follows-through on a purchase. Direct operator billing, for example, would provide a better mechanism and would have eliminated the zip code failure problem.

This issue is really about how big mobile commerce is becoming. Apple, and others, are taking advantage of a situation where rules just haven’t been established yet. Regulatory processes tend to be slow moving and backward looking which ultimately benefits behemoths with monopolistic market power. But the line has to be drawn now because this market is moving quickly and should be unfettered in order to encourage more innovation that benefits consumers and emerging technology developers. We’re sitting here watching Apple and others play the bully with their ridiculous patent portfolios. At the same time, they’re allowed to exert control over every aspect of the mobile ecosystem. It’s not asking too much to require them to open up their payments infrastructure while taking a minimal (and thus reasonable, i.e. not overly burdensome to developers or consumers) cut of the transaction. Furthermore, as long as Apple does choose to exert this kind of draconian control over its users and developers, the least it could do is present a modern payments process that makes things easier on its customers and doesn’t cost its developers precious sales.

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About the Author

About the Author: Ed Finegold is CSO for Validas, a company that specializes in personalized user experiences that leverage analytics-as-a-service to simplify mobile buying, selling, pricing & billing. Ed has been a regular contributor to BillingViews. .

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