The South Korean Parliament on Tuesday passed a Bill that is expected to rein in the control that Apple and Google have over payment systems in their app stores. The legislation is now awaiting the signature of the President of South Korea, Moon Jae-in.
This Bill is the first major legislation in the world to specifically target in-app markets and payment systems, even as market giants Apple and Google are facing global criticism for mandating the in-app use of their proprietary payment systems, and charging commissions of up to 30 per cent on the sale of apps and subscriptions through the app stores. Developers across the world have questioned these moves, and have demanded freedom to choose alternative methods of payment and distribution, such as via third-party app stores installed on the iOS or Android operating systems.
On Tuesday, South Korean legislators voted to approve amendments to their Telecommunications Business Act, with the intent of promoting fair competition in the app market industry. The bill prohibits app market business operators from taking advantage of their dominant status to force developers to use a specific payment system. It also prohibits app store service providers from engaging in activities such as preventing apps from registering on their stores, inappropriately delaying app registration and unfairly deleting apps from the app market. The move would also enable app developers to avoid the hefty commissions, and thus reduce costs both for developers and end-consumers.
In addition, the bill also empowers South Korea’s Minister of Science/ICT and the Korea Communications Commission to conduct an inquiry into the operations of the app market, to help the government more actively identify app-market related disputes and prevent acts that hinder fair competition and consumer interests.
This move comes as regulators worldwide have turned their attention to app stores and the fees they are charging developers. In the US, three senators introduced a bipartisan Bill earlier in August to promote fair competition by regulating in-app purchases and forcing dominant players from excluding third-party app stores from their operating systems. In India, the Competition Commission of India (CCI) has been investigating Google for potential abuses of its dominant position in the market to promote its proprietary payment services.
Apple and Google have both publicly opposed attempts to regulate their business practices through legislation.
Meanwhile, several industry players have reacted positively to the developments in South Korea. Rakesh Deshmukh, Co-founder & CEO of Indus App Bazaar, India’s largest third-party app store, shared his support for the move. He said that “policy needs to support innovation. We hope that Google enhances developer choice by allowing the listing of app distribution platforms like Indus App Bazaar on the Play Store. That would help us to formulate a B2C journey. I hope that App Stores like ourselves are allowed a fair play environment on Google Play and Android. Furthermore, in India, we need to look into developer choice for app distribution & payment gateways from a policy perspective.”
Sijo Kuruvilla, Executive Director of the Alliance of Digital India Foundation (ADIF), a startup alliance, welcomed the move by tweeting “Any legislation on the matter anywhere in the world will set a precedent for other nations to adopt and build on. To fair markets.”
Commenting on the developments from the US, the Coalition for App Fairness (CAF), an industry association of apps, reacted positively, terming it a momentous step forward, with Meghan DiMuzio, the Executive Director of CAF saying, “South Korean lawmakers and President Moon Jae-in have made history and are setting an example for the rest of the world. This law will hold app store gatekeepers accountable for their harmful and anti-competitive practices. The Coalition for App Fairness hopes U.S. and European lawmakers follow South Korea’s lead and continue their important work to level the playing field for all app developers and users.”
Match Group, that operates the largest portfolio of dating and social discovery apps such as Tinder and OKCupid, thanked South Korean Legislators in a statement, also saying that the legislation “… marks a monumental step in the fight for a fair app ecosystem…” and “…will put an end to mandatory IAP in South Korea, which will allow innovation, consumer choice, and competition to thrive in this market…” The statement adds, “We look forward to the bill being quickly signed into law and implore legislative bodies around the globe to take similar measures to protect their citizens and businesses from monopolistic gatekeepers that are restricting the Internet.”
Meanwhile, many Indian players have also noted these developments with interest, more so in context of opposition to Google’s “app tax” on in-app purchases and its impacts on local players.
NFN Labs, developers of popular apps like Screeny and Vookmark, who have had their share of run-ins with Google, Twitter, and Apple, have also been welcoming of alternative stores and choices of payment gateways.
Rajesh Padmanabhan, cofounder, NFN Labs in a statement said, “For our IoT product, Vookmark launching on Indus App bazaar has boosted our growth with a new set of engaged users…Additionally, we are exploring the ability to distribute and collect payments through alternative channels for our browser extensions, Android, and iOS packages. An alternative distribution that allows free uploads like Indus App Bazaar & lower commissions will certainly help to redirect funds for R&D and help us grow faster.”
The implications of the move in the Indian market remain to be seen, but Rakesh Deshmukh of Indus App Bazaar feels there is more that can be done with app distribution in India, “It’s about the choice of distribution; we all know that Google Play Store and App Store will continue to exist but we need more competition. We believe that choice is central to competition and hence when developers choose to distribute via our infrastructure, we allow a choice of payment gateway. This choice we believe would allow developers leverage to negotiate a reasonable fee with the two companies and payment gateway providers.”
India should make habit of entering sunrise sectors: Niti Aayog CEO
India’s past mistakes in the electronics manufacturing, like entering the sector late after China and other countries have seized the market, should not be repeated when it comes to the area of electric mobility, Niti Aayog Chief Executive Officer Amitabh Kant said on Saturday.
Speaking at a roundtable event in Goa to promote electric mobility in India, Kant also said that India can use its push towards electric mobility to change its perception as a nation which enters sunset sectors, to one which invests in sunrise sectors.
“In the last 70 years India has always been getting into the sunset areas of industry. And by the time you get into the sunset areas of industry it is too late. By that time the Chinese and other countries have already taken the market and they have the size and scale,” Kant said at the roundtable meeting in Goa, which was organised by the Union Ministry for Heavy Industries.
“And once they have the size and scale you’ll never be able to penetrate global markets. Therefore we are saying that you get into the sunrise areas of the future and these are the areas if you get in you will become a global champion,” he further said.
Kant also said that only those countries which opt for the digital and environment-friendly path would attract investment in the future.
“Those countries that go digital and go green will attract valuation and attract investment and those that do not go green and digital will go dead. There will be no future for those countries. This disruption is absolutely clear,” he said, adding that by the year 2025 there would be no two and three wheeler vehicles which use combustion.
“One of the lessons we learnt was that in mobile phones, the market grew in India but we became import dependent. What we learned in solar, the market grew in India but we became import dependent. Let us not make that mistake in the world of mobility,” he said.
“We must make India the centre of manufacturing both for the Indian market and for the rest of the world. And that is now dependent on all of you and makes the states of India the centre of manufacturing,” he added.
Omicron concerns: ‘Reverse Repo’ hike can wait, says SBI Ecowrap
The need to raise ‘Reverse Repo’ rate during the upcoming monetary policy review “can wait” till concerns over Covid-19’s new variant –Omicron are addressed, said SBI Ecowrap report.
Lately, concerns have risen over Omicron’s impact on growth.
The monetary policy review is slated for December 6-8.
It is widely expected that RBI’s MPC will maintain a status-quo in key lending rates.
At present, the MPC of the central bank has maintained the repo rate, or short-term lending rate, for commercial banks, at 4 per cent.
Consequently, the reverse repo rate was kept unchanged at 3.35 per cent.
Besides, system liquidity remains in the surplus mode with the average daily net absorption under the liquidity adjustment facility (LAF) at Rs 7.6 lakh crore in November 2021.
However, the RBI has made a calibrated progress towards liquidity normalisation since the October policy with amount parked in overnight fixed reverse repo declining to Rs 2.6 lakh crore from Rs 3.4 lakh crore at pre-October policy.
“Against this background, we believe the talks of a reverse repo rate hike in the MPC meeting may be premature as RBI has been largely able to narrow the corridor without the noise of rate hikes and ensuing market cacophony,” the report said.
Furthermore, the report cited that RBI is not obliged to act on reverse repo rate only in MPC.
“Also, change in reverse repo rate is an unconventional policy tool that the RBI has effectively deployed during crisis when it moved to a floor instead of the corridor.”
“We believe, the RBI may deflate the hype around reverse repo hike in monetary policy by explaining the virtues of using reverse repo change as a pure liquidity tool and not a rate tool.”
Additionally, the report pointed out that US Fed has indicated accelerating the bond tapering program, thereby, ending it earlier than anticipated.
“Against this background, delaying normalisation measures is prudent in the current situation which would also give time for economic recovery to strengthen further.”
“Also, rate differential needs to emerge between ‘VRRs’ of different maturities so that Banks are incentivized to park funds in the longer term ‘VRRRs’. This can be achieved by reducing the amount available under auction in 7 days and reallocating the same to 28 days.”
Tightening of norms may increase NBFCs’ headline NPAs: Ind-Ra
Tightening of norms may increase non-banking finance companies’ (NBFCs) headline non-performing advances (NPA) by around one third, India Ratings and Research (Ind-Ra) said.
“The Reserve Bank of India’s (RBI) clarification on NPA accounting is likely to increase NPAs by around one third for non-banking finance companies (NBFCs),” the ratings agency said.
“However, the impact on provisioning could be modest, given NBFCs are using ‘IND-As’ and generally for higher rated NBFCs, provision policy is more conservative than ‘IRAC’ requirements.”
Besides, the agency pointed out that NBFCs would have to invest in systems and processes to comply with daily stamping requirements.
“Ind-Ra understands that NBFCs have presented to the RBI for providing a transition period on this requirement.”
On the other aspects of RBI clarification, the agency said that NBFCs generally classify an account as stage 3 when there is a payment overdue for more than 90 days. Typically for monthly payments, this would be when there are 3 or more instalments overdue on any account.
“However, when the borrower makes part payment such that the total overdue is less than three instalments, the account is removed from NPA classification and classified as a standard asset, although it remains in the overdue category in case not all overdues are cleared.”
“The RBI clarification would allow stage 3 assets to become standard only when all the overdues or arrears (including interest) are cleared.”
Furthermore, the agency pointed out that NBFC borrowers are generally a weak class of borrowers and have volatile cash flows which could mean that once an account has been classified as NPA, “it could remain there for a considerable period as the ability to clear all dues may be constrained”.
In terms of the provisioning trend, NBFCs have transitioned to the ‘Ind-As’ regime and the provision created on any account is based on the historical data on “roll backs and roll forwards” and the credit loss experienced on accounts in different overdue buckets.
“This is different from the provisioning created on the accounts as per the standard IRAC norms. The NPA provisioning under Ind-As depends on the asset class and the riskiness of the account.”
“During Covid times, NBFCs have increased their provisioning cover for standard as well as NPA accounts. The new norms would restrict the movement from stage 3 to standard category unless all the overdues are cleared. So, accounts which have paid some part of the overdues would remain in NPA category and have to be provided accordingly.”
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