What Google’s Payments policy review means for Indian start-up ecosystem

Under the studious title of “Developer Program Policy Review: Payments”, Google has made it compulsory for developers to use Google Play Billing system as the only method of payment. The heavily hyperlinked update, with the first hyperlink appearing below the header, announces, “Play distributed apps must use Google Play’s billing system as the method of payment if they require or accept payment for access to features or services, including any app functionality, digital content or goods”. This applies only to apps and has been purportedly done to prevent revenue leakages to Google from Google Play from January 2021.

The Indian Founders’ community is on fire at the announcement of the policy. The primary likely reason is perceived dominance of Google Billing System. As a payment aggregator, currently unlicensed but soon to be licensed in India, Google Billing System can choose which payment instruments it would work with and which ones it would not. The new draft RBI guidelines on payment aggregators, too, allows for that freedom.

The compounding factor for many founders is the current revenue sharing policy of the Play. The “current payment policy link” also explains that Google Play has a revenue sharing model with all apps, which is 30 per cent of all transactions. For example, if a user subscribes to a VoD platform for Rs 900 per annum on the app, only 30 per cent of that is charged to the platform as revenue share. This does not apply to other app stores on Google Play.

Vishwas Patel, Founder, CCAvenues and Chairman, Payments Council Of India, said, “Just because Google owns the gate and the gateway to the digital ecosystem of this country, they should not act arbitrarily and enforce their rules and regulations which are contrary to our country’s laws. Also, they cannot force Indian Apps developers/ owners selling digital services to compulsorily use the Google Billing and payment system and charge 30 per cent MDR. They should not reject Indian Apps who are using RBI recognised Payment Aggregators and PG’s.”

He added, “Google’s stand in courts is that it does not need RBI authorisation as it is not a payment system operator and here it is mandating that Indian Apps use only Google’s proprietary Billing and Payment systems. Google should not exercise its dominant position, rather allow a level playing field for everyone in the ecosystem.”

Prima Facie, Google’s announcement today, even if legal, is certainly not innocuous. For many founders of Indian start-ups, this brings back fears of the not so old deeply problematic revenue share model between VAS service providers [mainly digital goods] and Telcos. Telcos took up to 70 per cent revenue share from VAS companies on the pre-text of discovery, marketing, collection. In India, 98 per cent of people use mobile internet, more than 90 per cent of people use android phones, which gives Google control over many layers between customers and their service providers.

IAMAI is seeking a meeting with its founder members to understand their concerns and to resolve them.