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In-App Purchase, or the raise of the App Economy

In-App Purchase, or the raise of the App Economy

Elena Di Simone

Senior Communications Consultant

12 June 2019

In-App Purchase, or the raise of the App Economy

 

What is In-App Purchase and why is it so important for the development of digital sales services with a perspective of constantly improving the user experience and the customer experience? The first answer to this question is that thanks to In-App Purchase, that is to say thanks to a transaction that is decided, activated and completed using mobile devices, without leaving the App, without having to use any external payment methods and with the possibility of immediately using the result of one's own purchase, a new market was born with the name of App Economy. In addition, new services, a new sales model and new sales channels have been created from In-App Purchases.

The In-App Purchase now involves over 3 billion people and has laid the foundations for a new culture in the way of using mobile devices and in the way of exploiting their potential for personal and social life and for the professional sphere. Worldwide In-app purchase revenues in 2017 were around $37 billion (Statista). In 2018, revenues grew even more: according to Sensor Tower, revenues from in-app spending grew 36% from $58 in 2017 to $79 in 2018 per US iPhone.

Up to March 2019, TikTok made $75 million from In-App purchases on the App Store and Google Play, while Netflix contributed in-app revenues of $853 million to the App Store (prior to leaving it at the end of 2018 in order to not pay the "Apple Tax").

In the annual report of App Annie, a service company for App providers, emerges the photograph of a rapidly expanding market. The company has analysed in the report (referring to the final data of 2017) a series of indicators such as the types of downloads, the consumer spending and the measurement of the time spent using apps. The company then made a comparison between the results obtained with those of the two previous years to read the trends underlying the various events. The results show three major events:

  • In 2017 there was a 60% increase in the number of apps downloaded globally compared to 2015 (almost 2 apps downloaded every month for each user);
  • Total consumer spending through the App Stores more than doubled.
  • Average daily time spent on apps grew by 30% in 2017 compared to 2015 (average of 3 hours per user per day). 


From a market point of view, the world of banking and financial services is a real reference point. The mobile sector, also thanks to the App Economy, is contributing to the digital disruption of the banking world. The number of financial interactions taking place on mobile platforms is growing. Mobile apps have accelerated the digital transformation of banks and instant P2P payments and, along with aggregators and wallet services, are gaining more and more time with consumers. 2017 saw an increase in the number of app users in the fintech world and is consolidating the role of mobile as a primary channel of consumer choice.

Fintech companies are a major competitor for retail banking. In addition, with PSD2 the world of fintech will have new opportunities to compete with the banking system and the App Economy, applied to the world of fintech and banking will help changing the value chain of the market. It is conceivable to see in the future different evolutions for the value chain no longer only controlled by banks with their ability to act on the retail market, but also a scenario that shows a relationship with consumers that can be increasingly monitored - through the App channel - by fintech.

And it is thanks to the App Economy that we can think of achieving a cashless environment thanks to a growth in the spread, use and enrichment of services for apps dedicated to payments.

The other great perspective of the App Economy is the integration with other evolving phenomena, first of all the Internet of Things, which can bring the opportunities developed in the field of mobile devices also in the field of connected cars and homes. And secondly, the integration with the Big Data and data Analytics, which can add new value to the possibilities of mobile development in professional environments.

The keystone for the development in these areas is linked to the In-App Purchase effect, which is the solution that, thanks to Identity management and payment, has made it possible to simplify and speed up the use of mobile as a commerce platform.