Mobile commerce on mobile devices continues to spread in Japan, with smartphones now a commonplace item. Mobile devices are used for a wide variety of purposes, such as playing games, online shopping via apps, and enjoying digital content.

When payments are required for content such as music, movies, and app games, they are made via app billing. There are two types of app billing: in-app and out-of-app. The latter has been gaining attention in recent years. In this article, we cover the basics of out-of-app billing that Japanese businesses need to know. We also provide advantages and disadvantages, differences from in-app billing, and the reasons out-of-app billing is gaining attention.

What’s in this article?

• What is out-of-app billing?
  
• Why is out-of-app billing gaining attention?
  
• Advantages of out-of-app billing
  
• Disadvantages of out-of-app billing
  
• What to consider when implementing out-of-app billing
  
• Examples of companies with out-of-app billing
  
• How Stripe Checkout can help
  

What is out-of-app billing?

Out-of-app billing refers to a payment method where purchases of app features or content are processed on an external payment page rather than within the app itself. Customers make payments on an external website, allowing them to choose payment methods that are not offered within the app. This can provide greater flexibility.

Differences between out-of-app and in-app billing

In-app billing is a method where customers make payments within the app they’re using. The main difference between out-of-app and in-app billing is where the payment is processed. Another difference is whether or not the app charges app fees. These fees can significantly impact the structure of app platforms. This is a key reason why out-of-app billing is gaining attention, as we explain in the next section.

Why is out-of-app billing gaining attention?

For in-app billing, customers must pay a payment processing fee to the app platform (e.g., Apple for the App Store, Google for Google Play). This fee is equivalent to 15–30% of the sales amount. Fees have been a long-running concern for many app operators, as they can negatively impact operations.

The App Store recently relaxed its restrictions on out-of-app billing, with Google soon following. As a result, out-of-app billing is now permitted for certain apps. Due to these changes, app operators have begun actively adopting mechanisms that redirect customers to external payment pages. This can increase revenue compared to traditional in-app billing. Note that these relaxed restrictions apply only to “reader apps” that provide digital content, such as videos, music, e-books, and digital magazines and newspapers. Game apps are excluded.

The Smartphone Software Competition Promotion Act—commonly known as the “New Smartphone Act”—passed in Japan in June 2024. This has further intensified efforts to promote competition in the smartphone sector and prevent market monopolization by specific companies. Major game developers are also beginning to introduce out-of-app billing.

The New Smartphone Act prohibits the following:

• Mandatory in-app billing
  
• Restrictions on placing external payment links within apps
  

Advantages of out-of-app billing

No transaction fees to the app platform

One of the most significant advantages of out-of-app billing is that there are no payment processing fees paid to the app platform. As explained above, payment processing fees incurred through in-app billing can reach as high as 30%. This can force businesses to bear high transaction costs that can impact their profit margins.

On the other hand, businesses can expect increased revenue with out-of-app billing because there are no payment processing fees. Increased revenue can occur even if a business sets the same price as in-app billing. Alternatively, since businesses don’t need to add payment processing fees to the price, they can offer less expensive services.

A comprehensive range of payment methods

With in-app billing, customers can only use the payment methods provided by the app platform. Having limited payment options could lead to a drop in user satisfaction. On top of that, businesses might not be able to accommodate the payment methods arranged by the app platform.

However, with out-of-app billing, businesses can handle payments more flexibly. For example, they could increase the number of payment options to meet customer needs or set up unique sales and points systems. This could lead to higher rates of customer satisfaction.

Disadvantages of out-of-app billing

Effort required to set up an in-house payment system

To implement out-of-app billing, businesses can either build their own payment environments on external sites linked to their apps or use payment agents.

If a business decides to set up its own payment system, it should consider various processes, including initial costs, ongoing operational expenses, and thorough security measures to prevent unauthorized access and personal information leaks. Therefore, accommodating out-of-app billing can increase employee workload.

To address these concerns, businesses can use a payment agent to handle payment-related work, such as contracting with individual payment service providers and setting up payment systems. Using a payment agent can reduce costs and time compared to building everything in-house.

For example, with a payment agent such as Stripe, a business can establish a payment environment suited to its style of operations without developing its own systems. Further, since Stripe has established a high level of security that meets all Payment Card Industry Data Security Standard (PCI DSS) requirements, customers enjoy a secure payment experience they can trust.

No payments within the app

Some customers might prefer to complete the entire payment process within the app. When making a payment through out-of-app billing, the customer is redirected from the app to an external website. Some customers might consider this a cumbersome process, especially if they prefer simpler payments.

However, many customers also find value in having their preferred payment methods readily available. It’s important to understand that customer preference determines the benefits of in-app versus out-of-app billing, so it can be challenging to determine which is superior.

What to consider when implementing out-of-app billing

Cost effectiveness

As explained above, businesses can expect to see higher profitability with out-of-app billing compared to in-app billing. However, when implementing out-of-app billing, it is important to assess its long-term profitability as well.

Therefore, businesses should evaluate which method is more beneficial and effective for growth. This could be implementing in-app billing that requires payment processing fees to be paid to the app platform. However, establishing and operating a payment environment on the company’s website for out-of-app billing could be more beneficial.

When implementing out-of-app billing and engaging a payment agent, businesses should thoroughly review the fee structure beforehand and discuss budgets and quotes.

Usability

Whether out-of-app or in-app billing is best depends on the individual customer. If a business implements out-of-app billing with an external site that isn’t user-friendly, customers who are accustomed to traditional in-app billing could find it inconvenient. This could pose a risk of increased customer abandonment. Therefore, for out-of-app billing, consider the following points when accommodating customers who are completing payments outside of the app:

• The external payment page accessed when leaving the app should be easy to view.
  
• The process from identity verification to payment completion should be simple and quick.
  
• A wide range of payment methods beyond credit card payments should be available, such as carrier payments and quick-response (QR) code payments.
  

Awareness of external sites

When implementing out-of-app billing, it is important to plan awareness campaigns and customer acquisition efforts for external sites. If the external site isn’t well recognized, businesses that implement out-of-app billing might not be able to draw customers to the site. Therefore, it could be difficult for businesses to generate value.

To effectively drive traffic to their websites, businesses should consider certain measures. For example, they can highlight the convenience of payment processing within the overview section of the website. Customers can view this information before downloading the app. Businesses could also send notifications about limited-time sales offers and campaigns to registered email addresses.

Examples of companies with out-of-app billing

COLOPL

COLOPL, Inc. is a Japanese company that develops and operates online games. It has introduced out-of-app billing that allows customers to buy in-game items more affordably from an external website than through the app platform.

COLOPL’s main games that support out-of-app billing include White Cat Project NEW WORLD’S and Black Cat Wiz. The purchase method is simple: customers can either copy the link code provided in the game’s Help section or access the official store via in-game banners and each game’s official website.

GameWith

GameWith operates one of Japan’s largest game strategy and introduction media platforms. It has also introduced initiatives to promote out-of-app billing. GameWith primarily generates revenue through advertising, but its apps are also used by many smartphone game users.

When examined within the broader mobile game market, GameWith’s app users exhibit greater spending tendencies and spend larger amounts. Therefore, by establishing out-of-app billing pathways on GameWith, the company expects to more easily reach customers with a greater desire to spend.

One specific example is GameWith’s mechanism for smoothly directing customers to the relevant item’s purchase page. The company achieves this by placing item banners within game strategy articles provided by the app and linking each banner to an out-of-app billing service.

Netflix

Netflix is a major subscription-based streaming service provider. The company displays the message, “Would you like to sign up for Netflix?” within the app. This link directs customers who want to sign up to its website. Once the customer finishes signing up and their payment has been processed, they can watch movies and TV shows on the app. This effectively bypasses the payment processing fees that the company would incur on the app platform.

How Stripe Checkout can help

Stripe Checkout is a fully customizable prebuilt payment form that makes it easy for you to accept payments on your website or application.

Checkout can help you:

• Increase conversion: Checkout’s mobile-optimized design and one-click checkout flow make it simple for customers to input and reuse their payment information.
  
• Reduce development time: Embed Checkout directly into your site, or direct customers to a Stripe-hosted page, with just a few lines of code.
  
• Improve security: Checkout handles sensitive card data, simplifying PCI compliance.
  
• Expand globally: Localize pricing in 100+ currencies with Adaptive Pricing, which supports 30+ languages and dynamically displays the payment methods most likely to improve conversion.
  
• Use advanced features: Integrate Checkout with other Stripe products, such as Billing for subscriptions, Radar for fraud prevention, and more.
  
• Maintain control: Fully customize the checkout experience, including saving payment methods and setting up post-purchase actions.
  

Learn more about how Checkout can optimize your payment flow, or get started today.