Google to comply with South Korea’s new third-party payment law

Seoul — Alphabet’s Google said on Thursday it plans to allow third-party payment systems in South Korea, to comply with a new law, marking the first time the US tech giant has amended its payment policy for a specific country.

Google’s announcement comes after a Korea Communications Commission’s (KCC) request for Google and Apple to come up with compliance plans for the new law, which bans major app store operators from forcing software developers to use their payments systems. Most of the new law went into effect in mid-September.

The curb is the first such move by a major economy on the likes of Apple and Google, which face global criticism for requiring the use of proprietary payment systems that charge commissions of up to 30%.

In late August, parliament passed an amendment to South Korea’s Telecommunications Business Act — dubbed the “anti-Google law” — banning big app store operators, such as Google and Apple, from forcing developers to use their payment systems, effectively stopping them from charging commission on in-app purchases.

“We respect the decision of the National Assembly, and we are sharing some changes to respond to this new law, including giving developers that sell in-app digital goods and services the option to add an alternative in-app billing system alongside Google Play’s billing system for their users in South Korea,” Google said in a statement.

Google, which charges developers a 15% service fee for distributing apps, said it would reduce this to 11% when users choose an alternative billing system, recognising that developers will incur costs to support their own billing system.

It was unclear how beneficial that would be for developers.

Google added that alternative billing systems may not offer the same protection or payment options and features of Google Play’s billing system.

The KCC said Google’s plans would be implemented in 2021 and would only apply to South Korea.

“We were able to confirm Google’s determination to comply with the law, and I hope [Google] will implement this policy change in a way to reflect the legislative purpose of the revised law,” said KCC chair Han Sang-hyuk.

In October, Apple told the South Korean government it was already in compliance with the new law and did not need to change its app store policy.

The KCC said it would ask Apple’s South Korean unit for a new policy allowing greater autonomy in payment methods. If Apple failed to comply, it would consider measures such as a fact-finding investigation as a precursor to possible fines or other penalties.

Apple did not immediately respond to a request for comment. 

Reuters