Will Brazil force Apple to admit App Store defeat?

Brazil’s antitrust body has joined a chorus of regulators to demand that Apple permit external payment methods in iOS apps. It’s just the latest page in an ongoing story, but might be enough to break this camel’s backbone. 

What this means, at the risk of stating the obvious, is that Apple now faces so much pressure to open up to external payment systems, it could finally make sense for it to bite the bullet and open up across all its territories rather than continue to fight. 

Apple has already been forced to open up in this way — and also to third-party app stores — in the EU, and to let US developers sell in-app content outside the App Store. It now faces similar pressure in the UK. But while it resists each of these moves, there is a cost to the company in legal fees and reputational damage attached to each battle in this conflict — at some point, it might make better business sense to cede the field.

A potential opportunity

While I don’t expect Apple is at all thrilled at how these cookies are crumbling, perhaps there is a way to turn all of this adversity into opportunity. If there’s ever been a time to add features and improvements to the payment systems Apple already provides, this is it.

It might also be time for Apple to take its payments infrastructure to other platforms and markets. Why shouldn’t you be able to pay for Android apps using Apple’s payment systems? Why not offer Apple payments to gamers from within Fortnite? Why not turn payments into products and grab an Apple-sized slice of the wider payments pie?

Customers from inside other ecosystems might be ready to embrace Apple’s rock-solid, highly secure, privacy-first payment system. What I’m saying is that Apple has a unique chance to compete, one from which it can continue to evangelize the advantages of the services (and platforms) it already provides for in-app purchases and everything else.  At the end of the day, the best way to keep people using its payments systems is to convince them that they want to use that system — even if they have a choice of others to use. 

With choice being imposed on the company, the company has an excuse to compete right back at competitors.

Who will lose?

Apple will not be blind to this, but support for external payment systems on its platforms remains very new and is only visible in a small number of markets. Given the potential risks of fraud and worse, it makes sense for Apple (and everyone else) to take a wait-and-see approach to extending this openness to new markets. It is just good practice to monitor what scams, frauds, and other attacks will emerge as third-party services are used on iOS in the EU. It’s not inconceivable that part of Apple’s reluctance to open up more widely yet (other than the money) is a desire to assess the perils and pitfalls of doing so — a trial in which Apple’s European customers are the crash test dummies.

But regulators don’t seem terribly keen to wait and see. Regulators in India, Brazil, UK, US, Japan, South Korea, and elsewhere now seem to agree that Apple must lift restrictions on payment methods for in-app purchases. It’s going to happen in the end.

What price platform integrity?

Even then, another problem Apple faces in that is that each nation could demand slightly different approaches to lifting those restrictions. The problem is that there is a development and infrastructure support cost, not to mention legal expenses, to each of those dictated approaches. What that means is that the less harmonious Apple lets payments on iOS become, the higher the cost of business. 

To avoid weakening the platform with a thousand cuts, it just makes more sense to lift the restrictions internationally, while also putting in place firm safeguards that permit Apple to swiftly remove any payment services identified as fraudulent or lax in security from its platforms. 

Now, I’m on the record arguing that I think there is a very high probability that once payment systems in apps are opened up this way we will see fraud, identity theft, and other forms of financial crime affect against Apple’s so-far highly secure platform. I think that’s inevitable.

Consumers will be damaged, and in the case of those using non-Apple payment services or app stores they cannot expect to get support from Apple. They may have accessed a non-Apple service on an Apple device, but the exchange will be between them and the service, not them and Apple. There will be confusion and broken hearts. This is what will happen.

Managed decline

But Apple can manage the experience and focus on showing the many ways it offers a better and safer system to use. It also means bowing to the inevitable and building something that satisfies regulators enough that they don’t choose to force Apple to build a system that dilutes its own platform. 

So, why has Apple resisted so much? Perhaps because it knows there are other criticisms reaching the anti-trust runway. Perhaps it feels that it makes sense to put up a fight on this particular hill in order to give it time to shore up better defenses on the other hills it currently holds.

All the same, the judgment coming out of Brazil suggests the company is running out of time to prepare for other battles, and now might be time to concede on this particular point. Despite which, if I were in Apple (or a regulator’s) shoes, I’d still try to delay any such move until the first casualties from the European experiment are identified and lessons learned. 

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