In-App Purchases vs. External Payment Gateway

People rely so much on their mobile phones in today’s modern world. What used to be a handy tool for communication is now the main source of almost everything useful in people’s day-to-day lives. There are mobile applications for entertainment, education, utility, health, productivity, lifestyle, news, and learning.

Almost all types of businesses have gone mobile to cater to the growing demands of users across the globe. But aside from developing apps, profit-making businesses also need to consider the best options available to collect payments from users.

If you want in-depth knowledge about the best payment option for your business, it is worth mentioning that an experienced high-risk merchant account provider can help you.

Payment Preferences

Major companies like Apple and Google have in-app purchasing plans. External payment gateways like Paypal and Stripe are other options to utilize for payment collection.

In-App Purchases

In-app purchases are integrated features developers offer in order to monetize the apps. While most mobile applications are downloadable for free, additional features can be purchased, which is especially prevalent in mobile games though they’re not the only apps that use this model. 

Applications in all categories downloadable via Google Play and App Store have in-app purchases for premium features, functionality, subscriptions, and other add-ons.

If you are a gaming app developer and you sell features to use in the game itself, in-app purchases would be ideal. Essentially, if you sell something that relates to a function or usability of the app, choose in-app purchases.

In-app purchases, when implemented correctly, can generate more profit. The option also allows developers to be more creative in ways to generate sales and revenue while enhancing user experience.

But then again, the use of in-app purchases to make a profit is not suitable for all applications. While in-app purchases are convenient and secure, this model can also be laborious for expert developers due to complex coding and continuing technical support. In addition, Google and Apple collect hefty cuts–a 30% fee for over a million dollars in revenue and 15% for less revenue. 

External Payment Gateways

External payment gateways refer to third-party providers that virtually process and authorize the payments like Paypal, Stripe, CardConnect, and Braintree.

External payment gateways work by securely encrypting data from the application to payment processors. This option can be advantageous for your brand as your app will less likely experience a data breach. Plus, the process of integrating is less demanding as it’s basically just plug-and-play.

However, implementing external payment gateways for your business app also means the possible introduction of exterior elements that are out of your control. 

Also, redirecting users to a different platform to complete a transaction may lead to a lower conversion rate as some users do not trust third-party payments or don’t want to deal with an additional step.

Despite this drawback, external payment gateways offer several benefits like upfront cost, no PCI compliance requirement (as no financial data is stored on your app), and less work for the developers.

Mostly, no consultation fee is needed while you get insights on how exactly the system works to ensure you execute the right choices for your business to succeed.