What is the Digital Markets Act (DMA)?

The Digital Markets Act is a European Union regulation designed to ensure fair competition in digital markets. It targets large tech companies (called "gatekeepers") like Apple, Google, and Meta, requiring them to open up their platforms and services to competitors. For Apple specifically, one key requirement is allowing app developers to use alternative payment systems outside the App Store, which could help them avoid Apple's commission fees.

How does Apple's commission system typically work?

Traditionally, Apple charges developers a commission on all in-app purchases and subscriptions processed through its App Store. This fee is typically 30% for the first year of a subscription and 15% in subsequent years. Before the DMA, Apple prohibited developers from directing users to alternative payment methods outside the App Store. This system effectively created a "toll" that developers had to pay to reach iOS users, impacting their profit margins significantly.

How might this policy change affect apps I use?

You might notice apps in the EU now offering alternative ways to pay for subscriptions or in-app purchases. For example, music streaming apps might direct you to their website to subscribe at a potentially lower price. Gaming apps might offer cheaper in-game currency when purchased outside the App Store. This could mean better deals for consumers, though the experience might require an extra step compared to the seamless in-app purchasing you're used to.

What's the potential investment opportunity here?

This regulatory change creates two main investment opportunities: 1) App developers (especially subscription-based services) could see improved profit margins by avoiding Apple's commission fees; and 2) Payment processing companies could gain access to billions in transaction volume that previously could only flow through Apple's payment system. Companies in both categories may see revenue growth and margin improvement as they adapt to and leverage this new regulatory environment.

Does this affect users and companies outside the EU?

Currently, these changes only apply within the European Union, as they're specifically mandated by EU regulation. However, regulators in other regions are watching closely, and similar rules could potentially be adopted elsewhere. Additionally, some companies might use their experience in the EU to lobby for similar changes in other markets, or to negotiate better terms with platform owners globally.

15 handpicked stocks

EU's Digital Markets Act Boosts App Economy

This collection features companies positioned to benefit from Apple's EU policy changes. App developers can now bypass App Store fees through alternative payment systems, potentially boosting their revenue, while payment processors gain access to new transaction streams.

Han Tan | Market Analyst

Updated 2 days ago | Published at जून 30