In-App Payments
What Are In-App Payments? Definition and How They Work
Definition
In-app payments are transactions completed within a mobile application, without the user leaving the app to visit a browser-based checkout or enter payment details manually. They encompass purchases of digital goods and services within apps (subject to app store payment rules), physical goods and service purchases through merchant apps, and in-app payment credential management through saved cards or digital wallets.
How it works
In-app payment flows differ depending on the transaction type and platform rules.
For digital goods and subscriptions within iOS or Android apps (in-app purchases), Apple and Google require that transactions use their respective in-app purchase frameworks: Apple's StoreKit and Google Play Billing. These frameworks route payments through the app store's payment infrastructure, with the platform taking a commission (commonly up to 30%, with reduced rates such as 15% for eligible small developers and, on some stores, for subscriptions; the exact rates and rules differ between Apple and Google and continue to change under regulatory pressure). Developers cannot use alternative payment processing for digital goods sold within an app on these platforms without specific exceptions.
For physical goods, services, and transactions outside the app store's jurisdiction, merchants integrate a payment SDK or payment sheet from their payment provider. The SDK renders a payment UI within the app context: a native-looking payment form or a sheet presenting saved cards, Apple Pay, and Google Pay options. The payment is processed through the merchant's own payment provider, not the app store. This path applies to ride-sharing fares, food delivery orders, e-commerce purchases, and similar real-world transactions.
Apple Pay and Google Pay integration in mobile apps provides a seamless one-tap payment experience: the customer authenticates with their device biometric and the payment is completed using a tokenised card credential stored in the device wallet. No manual card entry is required, and the merchant receives a device-specific payment token rather than the raw card number, reducing PCI scope.
PCI compliance implications for in-app payments depend on the integration approach. Using a hosted SDK that collects card data within the SDK's secure environment (and not in the merchant's own app code) reduces PCI scope; merchants building their own card input forms within the app take on full card data handling responsibilities.
Why it matters
Mobile commerce is the dominant and growing channel for consumer digital spending. Apps provide a higher-conversion, higher-engagement commerce environment than mobile web: saved payment credentials, biometric authentication, and native UX remove the friction that causes mobile web checkout abandonment. Merchants with strong mobile apps consistently report higher conversion rates on app transactions than on mobile web transactions for equivalent products.
App store payment rules create significant commercial tension for developers. Apple's 30% commission on in-app digital goods purchases has been a subject of major antitrust litigation and regulatory scrutiny globally. The EU's Digital Markets Act and court rulings in the US and other markets have created openings for alternative payment processing in certain app store contexts, though implementation remains complex and varies by platform and market.
Card-on-file and digital wallet integrations within apps reduce checkout friction to a single tap for returning customers. The conversion lift from eliminating manual card entry is significant, particularly on mobile where keyboard entry is slow and error-prone. Apple Pay and Google Pay integrations achieve checkout in one or two taps for enrolled users, materially improving conversion over manual entry flows.
With PXP
PXP supports merchants and partners across the payments value chain. To talk through in-app payments as part of your payment strategy, get in touch with our team.
Frequently asked questions
What is the difference between in-app purchases and in-app payments?
In-app purchases (IAP) specifically refer to transactions for digital goods and content made within a mobile app, governed by the app store's IAP framework (Apple's StoreKit, Google Play Billing). In-app payments is a broader term covering all payment transactions that occur within an app context, including physical goods purchases, service bookings, and peer-to-peer transfers that use the merchant's own payment processing infrastructure rather than the app store's framework.
Why does Apple take 30% of in-app purchases?
Apple's App Store commission model charges developers 30% (or 15% under the Small Business Program or for subscriptions after year one) on digital goods and subscriptions sold through apps on iOS. Apple argues this fee compensates for App Store distribution, payment processing, fraud prevention, and platform infrastructure. Critics argue it is an anticompetitive levy enabled by Apple's control of the iOS distribution channel. Ongoing regulatory proceedings in the EU (Digital Markets Act), US, and other markets are progressively requiring Apple to permit alternative payment options for specific transaction categories.
How do merchants reduce PCI scope for in-app card payments?
Merchants reduce PCI scope for in-app card payments by using their payment provider's hosted SDK for card data collection. The SDK renders the card input interface within the app but handles card data entirely within the SDK's secure environment, so raw card numbers never pass through the merchant's application code or servers. The merchant receives a payment token rather than card data. This approach places the merchant in a lower PCI SAQ tier, reducing audit and compliance obligations.
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