How does Fancy use Apple In-App-Purchases? Apple's TOS says this isn't allowed?

Not knowing exactly the violation you are speaking of, there could be two possible reasons for this:

1. Apple is aware of the alternative use of their platform and allows Fancy to use their system in a method that violates their TOS because of the volume of transactions and their communications with Apple.

2. Apple has not yet detected the violation and/or the violation has not been reported to Apple.

In short, here is what it takes in order to integrate In-App Purchases into an iOS app:
1. Perform some basic project configuration in Xcode.
2. Create In-App Purchase product records in the iTunes Connect portal.
3. Add specific code to get the IAP product info from Apple and perform payments.
Every In-App Purchase product fall to one of the following categories, depending always on the app’s nature and the kind of the purchase:
a) Consumable: This kind of product can be purchased multiple times, and not just once. For example, in a game a consumable product can be several extra lives for the main hero. Consumable products unlock app features just for a small period, and they don’t have permanent effect.
b) Non-Consumable: This category is the exact opposite to the previous one, and as you understand the purchase of a non-consumable product is made just once. For example, buying extra fonts for a text-editing app must be done just one time, and the extra fonts must be available from there on and forever.
c) Renewable Subscriptions: You can guess based on its name what this product kind is for. With this, the purchase must be renewed from time to time (the interval can be specified in the iTunes Connect), and it is suitable in cases you sell a service that requires a subscription.
d) Non-Renewable Subscriptions: On the contrary to the previous case, a non-renewable subscription lasts one time only and expires. It is useful in cases the provided service does not require a new subscription, and it is going to end after a period.
Apple Store says, before offering in‑app purchases, you will need to sign the Paid Applications Agreement and set up your banking and tax information. Use Xcode to enable the in‑app purchase service for your app. Configure your in‑app purchases in App Store Connect, and include details such as name, pricing, and description that highlights the features and functionality of your in‑app purchase. You can also create and maintain your in‑app purchases using XML.
I believe this is the way Fancy app use Apple In-App-Purchases in Apple Store.
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath