Industry wants a peaceful resolution to Google Play Store billing issue, looking for website payments to continue

A section of Indian startup founders and venture capitalists are alarmed at the pricing policies enforced by Google Play Store, but at the same time believe that stronger anti-trust regulations will go a longer way than the creation of parallel app stores in the country.

Further, since the American tech giant has pushed the deadline till April 2022, industry insiders believe there will be multiple rounds of negotiations with stakeholders, and there could be some compromise from Google.

Digital payment companies are also keen to know if off-app billing or billing from websites will be allowed for Google Play Store applications.

Most believe that the requirement of the hour is a careful negotiation with Google, rather than entering into a collision course in the name of ‘Atmanirbhar Bharat’. This thought process also gathers importance at a time when large Indian startup entrepreneurs have already formed a group to challenge the market dominance of Google.

Players like BharatMatrimony, Paytm, Dream11 and others have met the central government to present their case. Paytm has also launched a ‘mini app store’ to host web apps of popular companies.

Moneycontrol reached out to a clutch of large startups and venture capitalists to bring forth the different aspects of the debate.

Gaming startups have been feeling the heat of Google Play Store regulations for many years, and they have found an alternative – display their apps on their own websites. Now, given that India has leaped the laptop and desktop generation directly into the smartphone space, apps continue to be the major form of engagement in the country.

While this has created a challenge, it has opened up innovative business opportunities, too.

Gaming platform WinZO was a 4.8 star-rated app, with a 5 million user base and 50,000 reviews, till it was removed from the store.

“This gave birth to our unique distribution model and our Game Developer Console through which game developers globally could publish their games on our platform, and monetise it as per the law in different countries and not follow random policies that are different for different players,” said Saumya Singh Rathore, cofounder, WinZO Games.

Rathore believes Google’s demand for 30 percent charges as distribution costs will only encourage more innovative app developers to use alternate platforms like theirs to publish their games.

Google has put a charge of 30 percent on every transaction that is done for downloading apps through its store (can we say 30 percent on every app downloaded through its store?).

Now this is not unique. Apple is more stringent in its norms and mandates a 30 percent charge for all apps on the store and restricts any other form of payments. Apple is also facing multiple anti-trust regulations in the European Union because of these restrictions.

For a country like India, where in-app purchases form a miniscule portion of the overall business and revenues tend to be much smaller, a 30 percent cut might dent business opportunities for many startups.

If Google mandates this and restricts all other payment modes, startups will have no choice but to either pass it on to customers or take traffic to their websites for payments.

“Our Smart Plan, which is digitally consumed, will be affected by the move, while we are still waiting to see the outcome. I am sure my team will be able to figure out alternate channels to process payments from our customers,” said Tushar Vashisht, chief executive officer, Healthifyme.

This also brings to the fore another major question. Given that merchant discount rate or MDR is regulated in India, can Google get away by terming this payment as a distribution fee or will it be looked from the perspective of a transaction fee?

“If Google takes a cut of every payment made by the customer to the merchant, an app in this case, it might look like a payment gateway and then how much can it charge as commission for every transaction is an important question,” said Reeju Datta, cofounder, Cashfree, a Bengaluru-based payment gateway startup.

However, fintech consultant Mandar Kagade feels these are not to be mixed with MDR. This is more of a distribution fee and it is being levied because of the trust and security benefits Google brings with its Play Store apps.

“If they don't want to pay distribution charges, these companies can partner with other payment gateways to offer their apps through competing play stores or their own captive websites,” he added.

Even Datta believes that if Google allows website billing for its apps, the problem will not a major one and most companies will process payments through their website, like Netflix and Spotify.

“There needs to be some clarity on this. If website billing gets restricted, there is a problem,” he said.

While costs and restrictions are challenges, one major problem for startups adhering to Google Billing is the absence of recurring payments on Google. Industry insiders pointed out that Apple only allows card and payments through Apple ID, while Google is yet to add recurring payments.

This restricts payment modes, and, in turn, restricts business opportunities. Also, if Google allows UPI-based payments, by the sheer interoperable nature of UPI, all banks and payment processors will be allowed to integrate with Google Billing.

“We are looking forward to going live with recurring payments that will open a massive ease of transaction,” said Vashisht of Healthifyme.

Another startup founder, who spoke on condition of anonymity, pointed out that there is a high chance that Google will allow website billing to continue, otherwise they will face a lot of anti-trust heat the world over. Indian startups are imaginative enough to figure out alternate channels to bypass these restrictions, he said.

While a section of the industry is pushing for an Indian version of an app store and encouraging Indian app developers to publish their apps in desi stores, sceptics sound an alarm around getting the government involved in the app store business.

As a free market, the country cannot afford to bring in restrictive policies on business, feel a section of the industry.

“I am not sure if the government should build its own app store, (rather) it should take cognisance of the benefits app stores deliver to the users and developers and see if there are any monopolistic behaviour being exhibited,” said Arpit Agarwal, who is part of the investment team at Blume Ventures.

The founder, who spoke on condition of anonymity, also highlighted the same issue around getting the government involved. “It is like getting one gatekeeper for the other,” he said.

Datta also said that the government should rather look at building industry-favourable policies rather than getting into purely business decisions. He pointed out that the country needs stronger anti-trust regulations to prevent anti-competitive business moves rather than technological solutions.

“Once there's enough of a case for or against Google, requisite action can be taken within the purview of existing laws around competition in app marketplaces,” said Agarwal of Blume Ventures.