In-App Payment Collection Options

In-app payment collection is a necessary component of many businesses from retail to services. But what is the best way to build payment into an app? There are two main types of in-app payment and they are delineated by what you are selling: digital goods or physical commodities.

In-App Payment for Digital Purchases

If your business sells digital goods or services like media or games with premium options, you likely will need to utilize an in-app payment option for purchases. There are a whole host of virtual goods and upgrades that are sold within apps like digital currency, additional content or functionality, new gaming levels, and ad removal.

These kinds of digital purchases on iOS and Android devices are performed solely by Apple’s App Store or Google’s Play Store services. Neither company allows individual applications to sell digital goods through third-parties. Not only do you have to use their system, but there is a charge for it — both Google Play and the Apple App Store take a 30% cut of every in-app digital purchase.

If you are planning for in-app payment collection with Apple, you’ll need to leverage the StoreKit framework. It works in tandem with the App Store, connecting your app to Apple Pay. StoreKit acts as the go-between between your app and your server and the App Store as a secure way to manage and process payment. Apple notes four distinct types of in-app purchase:

  1. Consumables, which are distinguished by one-time use but can be purchased more than once
  2. Non-consumables refer to goods purchased only once with no expiration
  3. Auto-renewable subscriptions are purchased once and regularly renew
  4. Non-renewing subscriptions offer goods or services for a certain time frame, but users must choose to renew

Google Play Billing parallels the Apple version, with similar product types like one-time products and subscriptions. Google Play Billing also offers another in-app payment type you might consider: rewarded products. These allow customers to watch an advertisement in return for in-app rewards which could be additional lives in a game or in-app currency.

In-App Payment for Physical Goods or Services

In-app payment looks different for physical goods and services than it does for digital ones. To sell physical products, your app needs to integrate a “payment gateway.”

A payment gateway refers to the secure merchant service that processes credit card payments for both apps and online, acting as the middleman between your products and your customer’s bank account. When a customer checks out, the gateway sends a request to their bank; if approved, the bank then sends a code back to your app to complete the transaction.

You do get to chose the vendor for this service, and there is no fee imposed by Apple or Google. There are different in-app payment gateways to choose from and the type you select effects both the security of payment and customer experience. Here are several of the most common gateway types:

  1. Hosted or redirect gateways
  2. Local bank integration gateways
  3. Self-hosted and API hosted gateways

With hosted or redirect gateways, at the point of purchase, customers are moved to another site, like PayPal for example. Local bank integration is another type of redirect with the customer confirming details on their bank website. These gateways are often very secure, but do take away your control of user experience.

In-app payment for physical productsSelf-hosted gateways maintain your control of the entire customer experience by keeping users in your app or on your website. It’s worth noting that, in self-hosted gateways, you are taking on the responsibility of data security. The best known self-hosted gateway is Stripe that keeps users on your page, but manages the payment on the encrypted back-end.

API gateways keep customers in your app and are similar to self-hosted, but use Application Programing Interface to process payments. Amazon Pay is a popular API gateway.

Final Thoughts

If you are selling a digital product, in-app purchases might be the most convenient for your business, but giving Apple or Google 30% of your revenue can hurt. Even if your product is digital, there are ways to avoid in-app payment. For example, an app that provides educational content can sell the content outside of their app to institutions and/or individuals. They can then provide their customers with promo codes to use within the app.

If you are selling a physical product, you’ll avoid the 30% cut, but in-app payment still requires you to consider other factors. Most importantly, with physical goods you have to decide what the point of purchase experience will look like for your customers. The type of payment gateway you select alters how your customers pay, so knowing your consumers buying patterns and pain points can help you decide what gateway to choose.

If you need advice on how to integrate in-app payment collection, reach out to our team today to learn more.