Monday, February 26, 2024

Apple Opens Up iOS and App Store in Europe: Third-Party Stores and Alternative Payments Now Allowed

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Cupertino, California – In a dramatic shakeup, Apple has announced sweeping changes coming to iOS and the App Store in the European Union to comply with tough new tech regulations imposed by the bloc. For the first time, iPhone users in the EU will be able to download apps from third-party app stores, use alternative payment systems, and more easily switch default apps and web browsers.

The historic changes, coming in iOS 17.4 this March, end Apple’s exclusive control over app distribution on iOS devices in the region. Users will no longer be restricted to the preloaded App Store on iPhones and iPads. Instead, they can choose to install apps from competing app marketplaces.

This brings iOS more in line with the open Android operating system, which has long allowed sideloading apps and third-party stores. But Apple had fiercely resisted such a move until now, citing security concerns.

Experts say the changes will shake up the iOS ecosystem and app economy built up since the App Store launched along with the iPhone in 2007. Apple may see its App Store commissions and processing fees reduced as developers and users take advantage of new options.

Forced To Comply With EU Digital Markets Act

The EU’s landmark Digital Markets Act (DMA), which took effect last year, compels Apple to open up iOS to increase competition. After being designated a “gatekeeper” under the rules in September 2023, Apple had no choice but to comply or face heavy penalties.

The company previously contested the reforms, warning of new risks from malware, scams and illicit content if iOS was not as strictly controlled. But EU lawmakers remained firm, pushing forward regulations to curb the power of Big Tech giants.

This is the first time Apple has substantially loosened control over its mobile ecosystem under regulatory pressure. The move is expected to inspire similar reforms aimed at gatekeepers like Google’s Play Store and Amazon’s marketplace.

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More Consumer Choice Coming In iOS 17.4

When iOS 17.4 drops this March for iPhones and iPads in the EU’s 27 member countries, users will have far more options. During initial setup, they can select a different default app store, web browser and other apps.

Safari will no longer be the only option for iPhone web browsing. Users can easily switch to alternative browsers like Chrome or Firefox as the default.

In the past, Apple only allowed its own WebKit browser engine to be used. But now developers can integrate other engines like Blink and Gecko. This enables better compatibility with websites designed for those engines.

The stock App Store will get competition from stores operated by Apple’s rivals. Users will likely see popup prompts guiding them how to switch from the App Store to another marketplace.

Popular stores like Amazon Appstore, GetJar and Aptoide could become available. Epic Games may also launch its promised alternative store. However, Apple will still vet all apps for security.

Lower Commissions In EU App Store

The DMA requires Apple to allow developers to use third-party payment systems for in-app purchases and subscriptions. This bypasses Apple’s payment processing service and 15-30% commission on revenues.

To incentivize developers to stick with the App Store, Apple is lowering its commission to 17% in the EU. That falls further to 10% for some apps after the first year.

If developers use Apple’s payment system, a discounted 3% processing fee applies instead of the standard rate up to 30%. This makes Apple’s payment processing more competitive versus alternatives like Stripe.

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Experts say the lower commissions may result in cheaper app pricing for EU consumers compared to the rest of the world. App makers could pass on their App Store savings to users. This creates an uneven playing field between different regions.

Controversial “Apple Tax” For Popular Apps

In a controversial move, Apple is introducing a “Core Technology Fee” for popular apps earning over €1 million annually from the App Store. This new €0.50 charge per download has been dubbed the “Apple tax.”

Apple says the fee helps fund iOS security protections and proprietary technology like the App Store download mechanism. But developers see it as an unfair tactic to claw back some commission reductions.

Fortunately, the vast majority of smaller developers are exempt. Apple estimates over 99% of EU developers will pay the same or less commission overall after the changes.

The fee mostly affects larger developers of hit apps like Spotify, Epic Games and Tinder. But they have the resources and brand power to potentially bypass it by distributing outside the App Store.

NFC Access Granted To Rival Wallets & Apps

Another significant change coming is all apps getting access to iPhone NFC systems for payments and passes. Currently, Apple restricts NFC to Apple Pay and Wallet.

Now, rival digital wallets and financial apps can utilize NFC for tap-and-go payments, transit cards and building access cards directly on iPhone. Popular apps like Revolut and Curve will benefit.

This delivers on a key EU objective of opening NFC technology to increase competition and innovation in fintech and payments. More choice for consumers is expected as Apple Pay gets widely available alternatives for the first time.

Malware & Scam Threats?

Responding to the announced changes, Apple cautioned users about potential new risks from scams, dangerous apps and malware as iOS becomes more open. The company says all apps will still undergo security reviews before approval.

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But cybersecurity experts say iPhones will inevitably become more vulnerable targets as their walled-garden iOS model is dismantled bit-by-bit. iOS has historically been impenetrable to most malware threats plaguing Android.

For users willing to take some risks in exchange for more freedom and choice, the benefits may be worthwhile. But privacy advocates say users should be wary of new phishing and malware schemes aiming to exploit unsuspecting iPhone owners accustomed to Apple’s strict security.

Game-Changing Reform With Global Implications

Make no mistake, these are monumental and game-changing reforms almost unimaginable just a few years ago. While limited to the EU for now, they could set precedent for worldwide regulation of mobile ecosystems.

The smartphone market was upended when Apple introduced the iPhone and App Store in 2007. Now the EU tech rules threaten to upend Apple’s original vision and strategy.

But giving users more freedom and developers more options could reinvigorate innovation. And by maintaining security vetting, Apple may prove that iOS can open up without descending into the “Wild West” of the Android app ecosystem.

If EU consumers embrace the new openness, authorities elsewhere may push Apple and Google to replicate such measures in their own countries. Few imagined Apple would ever willingly relinquish so much control in Europe, but here we are.

After 15 years of dictating iOS terms, Apple is now on the defensive. But the tech giant thrives when forced to reinvent itself. The next chapter in the iOS and App Store story promises plot twists galore.

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Mezhar Alee
Mezhar Alee
Mezhar Alee is a prolific author who provides commentary and analysis on business, finance, politics, sports, and current events on his website Opportuneist. With over a decade of experience in journalism and blogging, Mezhar aims to deliver well-researched insights and thought-provoking perspectives on important local and global issues in society.

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