Friends, tell me, what is IAB? I just can’t find a key to this abbreviation.
In-App Billing (IAB), also called In-App Purchase, consists in the possibility for the user to
buy digital items inside an app or a game. Although those items are perceived to be bought
inside the App, the items are bought through the app store.
The need for the transactions to go through the app store were introduced as mandatory
by Apple App Store and then by Google Play. The conditions for the developer’s app to be
distributed is that all the financial transactions have to be managed by the app store.
The app store adds some value to this flow: 1) it may know the customer already and have
their payment data, thus easing the entrance hurdles for the user and providing a better user
experience, 2) it has the trust of the user when the developer may not have it yet and 3) it
develops the necessary technology, allowing the developer to focus on the app development.
Although IAB represents a market with a huge volume of transactions processed by Google
Play and Apple, there are still two big challenges.
The number of users with a credit card loaded in the store is still a minority. Only small
part of the world population has access to credit card. Alternative methods like pre-paid cards
are an approach but they are physical and depend on points of sale, therefore do not scale well.
On the other hand, some of other payment methods like carrier billing have prohibitive
margins that compromise the revenue share of 70% for the developer. In some markets, the
margin of the telecom operator varies between from 35% to 60% of the cost of the transaction.
The reasons given by the telecom operators are: 1) high risk of fraud that has to be compensated
and 2) the users may cannibalise the telecommunications balance so the margin has to pay that
possibility.
Providing the user has a proper payment method, there are still some risks that have to be
mitigated