My Ios app has a purchasing flow. I want to use Paypal as the payment gateway. since they provide an SDK for IOS, is it compulsory to develop the app through In-app purchase? If I use the Paypal SDK directly, will the app get rejected?
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Depends on what you’re selling. You have to use In-App Purchase if your app sells digital (non-physical) goods.
More info about In-App Purchase here.
You’ll find general guidelines here (see section 11 Purchasing and currencies).