According to news reports, the Japan Fair Trade Commission (JFTC) determined a policy to establish a new division in April 2025 that oversees and investigates major IT companies. A bill has been passed in Japan to encourage free competition in the IT field, following similar initiatives in overseas countries, and a gradual shift is underway to a new IT world, transforming the world created by major IT companies.
What kind of place is this new IT world that promotes free competition? Let us consider this question while looking at third-party payment services, which are part of these new trends.
A new IT world of free competition and innovation
How many Japanese people use smartphones other than iPhone or Android devices? Globally, iOS (Apple) and Android (Google) smartphones have a 99.8% share. These and other Big Tech companies provide many different platforms. By utilizing their excellent technologies and large market shares, these companies have created a more convenient and fulfilling world.
But while high market shares are a strength for tech companies, this situation makes it difficult for other players to enter the market and engage in free competition, and also discourages new business opportunities. To build a new IT world, we must solve this challenge and encourage free competition, which will lead to improved services and a better society.
Active efforts to build this new IT world are taking place on a global scale. The Digital Markets Act (DMA) has already been enacted in the European Union (EU) to facilitate fair competition. This law specifies which companies it applies to and prohibits “self-preference” methods in online search engines, app stores, social media, online sales, and other fields. It also obligates companies to release data. The United Kingdom’s Digital Markets, Competition and Consumers Act 2024 (DMCC Act) became law in May 2024. Going forward, it seems likely that more personnel will be assigned to carry out these measures in the EU and UK.
The Japanese Act on Promotion of Competition for Specified Smartphone Software (The Act) was passed in June 2024 and will come into effect by the end of 2025. It currently applies to businesses at or above a specific size, but it seems likely that the targets will be similar to the EU Act. The JFTC’s new division will be in charge of executing this law; it plans to build a structure for this and increase its external staff in the digital field. Seven Japanese IT industry organizations released a joint statement endorsing this law after it was passed, and the JFTC is collecting related comments from app business operators.
Users can buy apps outside the App Store and Google Play
The Act applies to app stores, web browsers, search engines, and operating systems, with a narrower scope than the DMA. For example, application software has only been available to download from the official App Store and Google Play store in the past. These are also called “apps.” (*Downloads are permitted outside of Google Play with some settings on Android models.)
Users will be able to download apps from other stores after the Act comes into effect, which will provide more choices to consumers and promote the development of new app stores. It may also result in lower handling fees for app business operators, which are currently around 30%.
At the same time, the App Store and Google Play have good security and privacy environments. We must keep a cautious eye on the impacts of the new law after it comes into force.
A popular American video game company launched its own app store
Companies in the video game industry have an especially positive attitude about the upcoming IT world. While manga apps have particularly high growth rates in Japan, the video game category is the most popular type of app across the globe.
Epic Games, an American company that developed the popular video game Fortnite, made a stir in the summer of 2024 by releasing a mobile version of Epic Games Store, its own storefront, that August. The iPhone version is available in the EU, and the Android version is available across the globe.
Today, Apple only allows alternative app marketplaces in the EU. It is expected that Epic Games will launch its iPhone store in Japan after the Act comes into effect in 2025.
In addition, we cannot overlook payment services, an important part of app profit models. This includes in-game items, as well as video and music subscription fees.
Apple has allowed “reader” apps since the end of March 2022. These apps link to external sites where users can access videos, music, e-books, newspapers, and other types of content. Reader apps also make it easier for consumers to use payment systems from external companies. However, this has not been allowed for video games, which are hugely profitable.
The American App Store’s policy was updated in January 2024 to permit links to external payment services within the United States. It is not clear whether app business operators have actively used this method, considering that handling fees were unchanged, and the fact that they must use Apple’s in-app payment system.
Japan’s first platform selling in-game items from multiple companies
Let us take a look at the Japanese video game industry, where services are being developed based on the App Store’s App Review Guidelines and Google Play’s Payments policy during this phase when companies are waiting for the new law to come into effect. On the App Store and Google Play, developers cannot display links to payment websites inside of their apps. However, they can provide information about third-party payment systems outside apps, through mediums like e-mail, social media, and websites.
Major corporations and other Japanese video game companies are starting to build and operate third-party payment structures according to these rules, allowing users to buy items at cheaper prices than past app stores. Companies benefit because they pay lower handling fees compared to app stores, where fees are based on sales amounts.
In addition to marketplaces for specific video game companies, “AppPay” is a new service that allows users to purchase in-game items from multiple companies outside of these apps. tems from ten different game titles are on sale as of August 31, 2024. “AppPay” charges app operators a fee of roughly 5%, which is significantly lower than existing app stores. Companies do not have to build any new systems with “AppPay”—they can create and offer payment systems and websites through this service, which makes it comparatively easy to use for medium-sized companies as well.
“AppPay” is Japan’s first(*1) online marketplace service. One of its developers commented, “This service could only be offered by the Digital Garage Group, which has a payment business track record of over 25 years. Each year, it handles payments exceeding six trillion yen.” Digital Garage Group is entering many new fields by providing digital contract and other FinTech services for the real estate industry, which were previously difficult to envision, along with B2B payment services. With “AppPay,” Digital Garage Group is taking a step towards the future in a way that no other company can achieve. The Group believes that its businesses can help change accepted practices in our world built by Big Tech companies.
Just a little over one year remains until the new law comes into force. How will Japan be transformed as it follows the example of other countries while preparing for the new law? Apple and Google’s world is certainly not a bad one, but we are approaching a brand-new IT world of new business opportunities and increasing smartphone innovations.
* 1: The first marketplace service for in-game items by a Japanese company. Source: Digital Garage (June 3, 2024).
