RE: [newtech-1] Re: Whatever happened to micropayments?

From: user 3.
Sent on: Thursday, August 23, 2007 10:36 AM

This page will tell you all about how Paypal supports micropayments today:

https://www.paypal.com/IntegrationCenter/ic_micropayments.html

 

This is a step in the right direction (reducing the fixed cost to $0.05, albeit at the price of a higher 5% fee of the transaction amount) although still too high for some business scenarios. I completely agree that Paypal could do more to address that market on the basis of both their users base and merchant acceptance. I haven’t asked Paypal directly for their thoughts on this issue but here are some likely reasons:

-          Paypal is doing its best to steep participants to fund payments with bank accounts rather than credit cards (ACH out of bank accounts cost pennies and no % of the transaction amount) yet a high percentage of payments are funded by credit cards. This means Paypal incurs the traditional cost structure of credit card transactions in many cases – so if they want to present a simple fee structure for micropayments, they have to weight-average credit card costs into their own cost structure

-          Then of course Paypal has its own variable costs on top of every transaction, such as a large department screening transactions for fraud or the potential additional customer support calls resulting from each additional line item in consumer statements

 

Hope this helps.

 

Patrick

 

From: [address removed] [mailto:[address removed]] On Behalf Of Yaakov Sash
Sent: Thursday, August 23,[masked]:43 AM
To: [address removed]
Subject: Re: [newtech-1] Re: Whatever happened to micropayments?

 

Thanks for the inside look, Patrick.

 

I was curious if you had any insight for the NY Tech list as to why PayPal has not aggressively attacked this micropayment market. And if they have, why hasn't it caught on? PayPal (and now Google Checkout) seems uniquely positioned to offer a micropayment solution because they are already on merchants' websites.

 

I'm thinking that it could be that the transaction cost is still too high and/or consumers abhor "store credit" even when it's not called such. What do you think?

 

Yaakov Sash

www.jkn.com - annotate the web

----- Original Message -----

From: Patrick Questembert

To: [address removed]

Sent: Thursday, August 23, [masked]:12 AM

Subject: [newtech-1] Re: Whatever happened to micropayments?

 

The main reason micropayments solutions have not materialized online is not because it’s too hard to build the infrastructure to hold electronic accounts and disburse funds out of them in small amounts, it’s the old and familiar chicken and egg problem: merchants are reluctant to upgrade checkout pages to support a new form of payment unless there is a large users base out there already equipped with suitable accounts, while consumers are unwilling to sign-up for a new type of account unless there already are hundreds of merchants accepting that form of payment. Folks on this list may think that signing up to connect their bank account to a new type of account (assume the process is the same as signing-up for Paypal) is no big deal, but not so for the public at large.

Digicash (the company I work for) solves the problem partially, as follows: we enable any online merchant to charge a consumer (using traditional methods of payments) for a lump of his own currency – call it a pre-payment – then use this “store credit” multiple times in small payments. The prepayment feels to the consumer as a normal charge, not requiring any special account, then each micropayment drawing upon that credit in the future is a closed-loop lightweight transaction between the merchant and that unit of credit. I call it a partial solution because prepaying for amounts much larger than the purchase at hand, in the hope that the currency will be usable in the future, is not something consumers are necessarily happy to do. We help with that issue by representing that currency in  a form which very easily allows other partner merchants to accept it as well. In your example, several wifi providers could agree to consume a common currency, changing your decision to prepay from “Will I ever use that provider again?” into “Will I ever need paid wifi access again?”. And of course other entities such as charitable organizations can accept that currency as well. Another way we help with that decision is by making it easily transferable, making it “Will I or friends travelling with me need paid wifi access in the future again?”.

Patrick

Patrick Questembert CEO and Founder, Digicash, www.digicash.com
contact | [address removed] – cell [masked] | FAX [masked]

Subject: Whatever happened to micropayments?

From: Nick B.

Date: August 22,[masked]:46 PM

Reply to sender   Reply to group

Every time I have to yank out my wallet in a public place just to buy a few
hours of wifi, or look at a donation button on a site, I ask myself:

"Whatever happened to micropayments?"

A problem still not solved, an vein still not tapped, despite years of
effort. What's the deal??

- Nick





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