Micropayment

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A micropayment is a financial transaction involving a very small sum of money and usually one that occurs online. A number of micropayment systems were proposed and developed in the mid-to-late 1990s, all of which were ultimately unsuccessful. A second generation of micropayment systems emerged in the 2010s.

Contents

While micropayments were originally envisioned to involve very small sums of money, practical systems to allow transactions of less than US$1 have seen little success. [1] One problem that has prevented the emergence of micropayment systems is a need to keep costs for individual transactions low, [2] which is impractical when transacting such small sums [3] even if the transaction fee is just a few cents.

Definition

There are a number of different definitions of what constitutes a micropayment. PayPal defines a micropayment as a transaction of less than £5 [4] while Visa defines it as a transaction under 20 Australian dollars. [5] [ verification needed ]

History

The term was coined by Ted Nelson, [6] long before the invention of the World Wide Web. Initially this was conceived as a way to pay the various copyright holders of a compound work. [7] Micropayments, on the Web, were initially devised as a way of allowing the sale of online content and as a way to pay for very low cost network services. [8] They were envisioned to involve small fractions of a cent, as little as US$0.0001 [9] to a few cents. [3] Micropayments would enable people to sell content on the Internet [3] and would be an alternative to advertising revenue. [10] During the late 1990s, there was a movement to create microtransaction standards, [3] and the World Wide Web Consortium (W3C) worked on incorporating micropayments into HTML even going as far as to suggest the embedding of payment-request information in HTTP error codes. [2] The W3C has since stopped its efforts in this area, [2] and micropayments have not become a widely used method of selling content over the Internet.

Early research and systems

In the late 1990s, established companies like IBM and Compaq had microtransaction divisions, [3] and research on micropayments and micropayment standards was performed at Carnegie Mellon and by the World Wide Web Consortium.

IBM Micro Payments

IBM's Micro Payments was established c. 1999, [11] and were it to have become operational would have "allowed vendors and merchants to sell content, information, and services over the Internet for amounts as low as one cent". [12]

iPIN

An early attempt at making micropayments work, iPIN was a 1998 venture-capital-funded startup that provided services that allowed purchasers to add incremental micropayment charges to their existing bill for Internet services. [13] Debuting in 1999, its service was never widely adopted. [13]

Millicent

Millicent, originally a project of Digital Equipment Corporation, [14] was a micropayment system that was to support transactions from as small as 1/10 of a cent up to $5.00. [15] It grew out of The Millicent Protocol for Inexpensive Electronic Commerce, which was presented at the 1995 World Wide Web Conference in Boston, [16] but the project became associated with Compaq after that company purchased Digital Equipment Corporation. [14] The payment system employed symmetric cryptography. [17]

NetBill

The NetBill electronic commerce project at Carnegie Mellon university researched Distributed transaction processing systems and developed protocols and software to support payment for goods and services over the Internet. [18] It featured pre-paid accounts from which micropayment charges could be drawn. [19] NetBill was initially absorbed by CyberCash in 1997 and ultimately taken over by PayPal. [20]

Online gaming

The term micropayment or microtransaction is sometimes attributed to the sale of virtual goods in online games, most commonly[ citation needed ] involving an in-game currency or service bought with real world money and only available within the online game.

Recent systems

Current systems either allow many micropayments but charge the user's phone bill one lump sum or use funded wallets.

Dropp

Dropp is a micropayments platform that allows consumers and merchants to make and accept payments as low as $0.01 for physical or digital goods and services. [21] Dropp accepts both FIAT and cryptocurrencies: the US dollar, AED, HBAR, and USDC. Dropp's platform is designed to provide a Pay-Per-Use alternative to flat fee paid subscriptions as a solution to consumer subscription fatigue. Dropp provides an alternative monetization model to digital merchants while maintaining complete privacy for consumer transactions. Dropp's fee is 5 cents for a $1 transaction, with an average fee of 1% + 25 cents on all transactions above $5. Dropp is currently supported on mobile and web browsers and has Shopify and WordPress user plugins for accepting micropayments.

Flattr

Flattr is a micropayment system (more specifically, a microdonation system) which launched in August 2010. [22] Actual bank transactions and overhead costs are involved only on funds withdrawn from the recipient's accounts.

Jamatto

Jamatto is a micropayments and microsubscriptions system that allows websites and publishers to accept payments as small as 1¢ by modifying just their HTML source code [23] Jamatto is in use by newspapers across three continents.

M-Coin

A service provided by TIMWE, M-Coin allows users to make micropayments on the Internet. The user's phone bill is then charged by the mobile network operator. [24]

PayPal

PayPal MicroPayments is a micropayment system that charges payments to user's PayPal account and allows transactions of less than US$12 to take place. [25] As of 2013, the service is offered in selected currencies only. [26] The PayPal charge for a micropayment from a U.S. account is a flat five cents per transaction plus five percent of the transaction (as compared with PayPal's normal 2.9% and 30 cents for larger sums). [27]

Swish

Swish is a payment system between bank accounts in Sweden. It is designed for small instant transactions between people, instead of using cash (cash has largely dropped in use in Sweden since 2010), but is also used by small businesses such as sports clubs that don't want to deal with the cost of a credit card reader. A cell phone number is used as a unique user identifier, and must have been registered at a Swedish bank. A smartphone app is used to send money, but any cell phone can be used as a receiver. The lowest permitted payment is 1 SEK (around 0.09 EUR) and the highest is 10,000 (around 950 EUR), although 150,000 SEK can be transferred if the transaction is preregistered in the internet bank. The fee is generally zero for private people, but when the receiver is an organisation e.g. sports club or company, there is fee of 2 SEK, which is considered significant if a sports club sells coffee and cookies at an event. Swish has become popular, with 50% of the Swedish population registered as users in 2016.

Similar apps with zero fee for small instant private transactions, Vipps and MobilePay have become popular in Norway and Denmark.

Tikkie

Tikkie is a Dutch payment system in the Netherlands, Belgium and Germany, run by the ABN AMRO bank. It is available to anyone with a Dutch bank account and a Dutch, Belgian or German phone number. It was originally marketed as a way to share costs between friends, e.g. when sharing a ride or at a restaurant or buying movie tickets, but there is now also a business variant for e.g. paying toll fees or congestion charges, and a restaurant variant whereby the restaurant sends payment requests to the individual people at the table. Tikkie is free for private transactions (even for users of other banks, since Dutch banks typically charge annual banking fees instead of per-transaction fees), but there is a transaction cost for business clients. [28]

A Tikkie payment request consists of a generated hyperlink (which may be encoded as a QR code) that redirects to the iDeal payment system which is used by most banks in the Netherlands. If the payer has a banking app for any Dutch bank on his mobile device, the Tikkie link can open the banking app directly. Alternatively, the payment can be made in a web browser. Payment requests are generated by an Apple or Android mobile app and payment requests are typically sent via messaging systems like WhatsApp or Telegram.

In 2017 there were 1 million users and 150 000 payment requests per week. By 2018, Tikkie reported 2 million users and 440 000 payment requests per week. By 2019, there were about 5 million users, with 200 000 payment requests per day. 50% of Tikkie payment requests are honoured within 1 hour, and 80% are paid within 24 hours. [29] In 2017, the average payment request was EUR 12. [30] By 2018, the average payment request was EUR 27.50. A sender may send no more than EUR 750 and a recipient may receive no more than EUR 2500 per Tikkie. [31] The domain name used by Tikkie is Tikkie.me instead of Tikkie.nl. In the Netherlands, it is unusual for companies to use non-NL domain names, and with Tikkie using a Montenegro domain name contributed to the success of some phishing attacks.

Blendle

Blendle is an online news platform that aggregates articles from a variety of newspapers and magazines and sells them on a pay-per-article basis, leading Nieman Lab to describe it as a "micropayments-for-news pioneer". [32] It operates in the Netherlands, Germany and the US. [32] In 2019, five years after its launch, it announced that it would change its business model away from micropayments to premium subscriptions. [32] Nieman Lab commented that "micropayments keep not panning out". [32]

Obsolete systems

Zong

Zong mobile payments was a micropayment system that charged payments to users' mobile phone bills. The company was acquired by eBay and integrated with PayPal in 2011. [33]

Related Research Articles

<span class="mw-page-title-main">Debit card</span> Card used for financial transactions, usually without a credit line

A debit card, also known as a check card or bank card, is a payment card that can be used in place of cash to make purchases. The term plastic card includes the above as well as an identity document. The card usually consists of the bank's name, a card number, the cardholder's name, and an expiration date, on either the front or the back. Many of the new cards now have a chip on them, which allows people to use their card by touch (contactless), or by inserting the card and keying in a PIN as with swiping the magnetic stripe. These are similar to a credit card, but unlike a credit card, the money for the purchase must be in the cardholder's bank account at the time of the purchase and is immediately transferred directly from that account to the merchant's account to pay for the purchase.

<span class="mw-page-title-main">PayPal</span> American multinational financial technology company

PayPal Holdings, Inc. is an American multinational financial technology company operating an online payments system in the majority of countries that support online money transfers, and serves as an electronic alternative to traditional paper methods such as checks and money orders. The company operates as a payment processor for online vendors, auction sites and many other commercial users, for which it charges a fee.

<span class="mw-page-title-main">Mobile payment</span> Payment services via a mobile device

A mobile payment, also referred to as mobile money, mobile money transfer and mobile wallet, is any of various payment processing services operated under financial regulations and performed from or via a mobile device, as the cardinal class of digital wallet. Instead of paying with cash, cheque, or credit cards, a consumer can use a payment app on a mobile device to pay for a wide range of services and digital or hard goods. Although the concept of using non-coin-based currency systems has a long history, it is only in the 21st century that the technology to support such systems has become widely available.

A transaction account, also called a checking account, chequing account, current account, demand deposit account, or share draft account at credit unions, is a deposit account or bank account held at a bank or other financial institution. It is available to the account owner "on demand" and is available for frequent and immediate access by the account owner or to others as the account owner may direct. Access may be in a variety of ways, such as cash withdrawals, use of debit cards, cheques (checks) and electronic transfer. In economic terms, the funds held in a transaction account are regarded as liquid funds. In accounting terms, they are considered as cash.

Mobile banking is a service provided by a bank or other financial institution that allows its customers to conduct financial transactions remotely using a mobile device such as a smartphone or tablet. Unlike the related internet banking it uses software, usually called an app, provided by the financial institution for the purpose. Mobile banking is usually available on a 24-hour basis. Some financial institutions have restrictions on which accounts may be accessed through mobile banking, as well as a limit on the amount that can be transacted. Mobile banking is dependent on the availability of an internet or data connection to the mobile device.

<span class="mw-page-title-main">Google Pay Send</span> Mobile payment system developed by Google

Google Pay Send, previously known as Google Wallet, was a peer-to-peer payments service developed by Google before its merger into Google Pay. It allowed people to send and receive money from a mobile device or desktop computer.

Zong was a mobile payment company that allowed users to make micropayments on the Internet if they have a postpaid mobile phone. The payments were charged to their mobile phone bills by the mobile operator. The company was acquired by eBay in 2011 and disappeared in 2015.

The National Payments Corporation of India is an umbrella organization for operating retail payments and settlement systems in India, is an initiative of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India. It was created by RBI for operating retail payments and settlement systems in India.

Mobile payments is a mode of payment using mobile phones. Instead of using methods like cash, cheque, and credit card, a customer can use a mobile phone to transfer money or to pay for goods and services. A customer can transfer money or pay for goods and services by sending an SMS, using a Java application over GPRS, a WAP service, over IVR or other mobile communication technologies. In India, this service is bank-led. Customers wishing to avail themselves of this service will have to register with banks which provide this service. Currently, this service is being offered by several major banks and is expected to grow further. Mobile Payment Forum of India (MPFI) is the umbrella organisation which is responsible for deploying mobile payments in India.

<span class="mw-page-title-main">Zettle</span> Swedish financial technology company

Zettle by PayPal is a Swedish financial technology company founded by Jacob de Geer and Magnus Nilsson in April 2010. Launching its first app and service in 2011, the company offers a range of financial products including payments, point of sales, funding and partners applications. The company was acquired by PayPal in 2021.

Apple Pay is a mobile payment service by Apple Inc. that allows users to make payments in person, in iOS apps, and on the web. It is supported on iPhone, Apple Watch, iPad, and Mac. It digitizes and can replace a credit or debit card chip and PIN transaction at a contactless-capable point-of-sale terminal. It does not require Apple Pay-specific contactless payment terminals; it can work with any merchant that accepts contactless payments. It adds two-factor authentication via Touch ID, Face ID, PIN, or passcode. Devices wirelessly communicate with point of sale systems using near field communication (NFC), with an embedded secure element (eSE) to securely store payment data and perform cryptographic functions, and Apple's Touch ID and Face ID for biometric authentication.

Venmo is an American mobile payment service founded in 2009 and owned by PayPal since 2013. Venmo was aimed at friends and family who wish to split bills, e.g. for movies, dinner, rent, or event tickets etc. Account holders can transfer funds to others via a mobile phone app; both the sender and receiver must live in the United States. On Venmo, a little social network, users can observe how others who are sending money to one another interact with amusing emoticons. In 2021 the company handled $230 billion in transactions and generated $850 million in revenue.

<span class="mw-page-title-main">Zelle (payment service)</span> Digital payments network

Zelle is a United States–based digital payments network run by a private financial services company owned by the banks Bank of America, Truist, Capital One, JPMorgan Chase, PNC Bank, U.S. Bank, and Wells Fargo. The Zelle service enables individuals to electronically transfer money from their bank account to another registered user's bank account using a mobile device or the website of a participating banking institution.

Oxigen Services is an Indian fintech company. It is involved in the micropayment of services and remittances in real time.

Peer-to-peer transactions are electronic money transfers made from one person to another through an intermediary, typically referred to as a P2P payment application. P2P payments can be sent and received via mobile device or any home computer with access to the Internet, offering a convenient alternative to traditional payment methods.

VugaPay is a cross-platform payment service owned by Vuga Ltd, a Rwandan company. It allows businesses and users to transfer money across major payment systems, including credit card networks, mobile money and Bitcoin via an application programming interface, unstructured supplementary service data interface, a mobile phone app, or a web interface. It processed over 5 million transactions in 2016. As of December 2016, VugaPay offers instant payments to and from 40 different mobile money networks/carriers in Rwanda, Kenya, Uganda, Niger, Malawi, Congo Democratic Republic, Ghana, Tanzania and Zambia.

WeChat Pay, officially referred to as Weixin Pay in China, is a mobile payment and digital wallet service by WeChat based in China that allows users to make mobile payments and online transactions. As of March 2016, WeChat Pay had over 300 million users. WeChat Pay's main competitor in China and the market leader in online payments is Alibaba Group's Alipay. Alibaba company founder Jack Ma considered the red envelope feature to be a "Pearl Harbor moment", as it began to erode Alipay's historic dominance in the online payments industry in China, especially in peer-to-peer money transfer. The success prompted Alibaba to launch its own version of virtual red envelopes in its competing Laiwang service. Other competitors, Baidu Wallet and Sina Weibo, also launched similar features.

<span class="mw-page-title-main">Google Pay (payment method)</span> Mobile payments platform developed by Google

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<span class="mw-page-title-main">Cash App</span> Mobile payment service developed by Block, Inc.

Cash App is a mobile payment service available in the United States and the United Kingdom that allows users to transfer money to one another using a mobile phone app. In September 2021, the service reported 70 million annual transacting users and US$1.8 billion in gross profit.

Swish is a mobile payment system in Sweden. The service was launched in 2012 by six large Swedish banks, in cooperation with Bankgirot and the Central Bank of Sweden. It had 8 million users as of July 2022. Swish is a member of the European Mobile Payment Systems Association.

References

  1. ↑ "In Online World, Pocket Change Is Not Easily Spent". The New York Times. 27 August 2007.
  2. 1 2 3 "Micropayments Overview". w3c.com.
  3. 1 2 3 4 5 "Toward a Click-and-Pay Standard". wired.com. 11 March 1999.
  4. ↑ "Get Paid Small Amounts Online with Micropayments". www.paypal.com. Retrieved 12 July 2015.
  5. ↑ "Visa launches new way to pay online". payclick.com.au. 24 June 2010. Archived from the original on 6 July 2011.
  6. ↑ "The Babbage of the web" . Retrieved 13 November 2017.
  7. ↑ Nelson, Ted. "A THOUGHT FOR YOUR PENNIES: MICROPAYMENT AND THE LIBERATION OF CONTENT" . Retrieved 13 November 2017.
  8. ↑ Hardy, Norm; Tribble, Dean (1993). "The Digital Silk Road". CiteSeerX   10.1.1.53.6972 .
  9. ↑ Theerasak Thanasankit (2003). E-commerce and Cultural Values. ISBN   9781591400561.
  10. ↑ "Common Markup for micropayment per-fee-links 1.1 Origin and Goals". W3C Working Draft. 25 August 1999.
  11. ↑ "Archives of IBM Micro Payment sites". Archived from the original on 3 February 1999.
  12. ↑ "IBM Micro Payments". Archived from the original on 30 August 2000.
  13. 1 2 Johnson, Amy Hellen (15 May 2000). "iPIN". ComputerWorld.com. ComputerWorld. Retrieved 4 January 2012.
  14. 1 2 "Compaq to license digital cash technology". cnet.com. 23 December 1998.
  15. ↑ "Millicent". Archived from the original on 1 June 1997.
  16. ↑ "What's New". Millicent. June 1997. Archived from the original on 7 July 1997.
  17. ↑ "2.6.10 Micro Payments (micropay) bof Current Meeting Report". ietf.org. Internet Engineering Task Force. 8 November 1999.
  18. ↑ "The NetBill Project". Archived from the original on 13 June 1997.
  19. ↑ "About NetBill". Archived from the original on 9 October 2002.
  20. ↑ "CyberCash press release". Archived from the original on 11 June 1997. Retrieved 12 January 2015.{{cite web}}: CS1 maint: unfit URL (link)
  21. ↑ "Dropp Micropayments". dropp.cc. Retrieved 28 July 2021.
  22. ↑ O'Hear, Steve (12 August 2010). "Flattr opens to the public, now anybody can 'Like' a site with real money". TechCrunch Europe. Retrieved 13 August 2010.
  23. ↑ "Jamatto Micropayments". jamatto.com. Retrieved 1 December 2017.
  24. ↑ "MCoin Product Lines – Mobile Marketing magazine". Mobile Marketing Magazine. 30 June 2011. Archived from the original on 24 July 2011. Retrieved 2 July 2011.
  25. ↑ Rao, Leena (26 October 2010). "PayPal Unveils Micropayments For Digital Goods, Facebook Signs Up". techcrunch.com. AOL. Retrieved 23 November 2012.
  26. ↑ "Micropayments". PayPal Integration Center. PayPal. Retrieved 23 November 2012.
  27. ↑ Article on Micropayments
  28. ↑ "Tikkie".
  29. ↑ "Nederlanders betalen bijna 200.000 Tikkies per dag".
  30. ↑ "Waarom gratis betaal-app Tikkie zo waardevol is voor ABN". 8 March 2017.
  31. ↑ "Tikkie: Hoe werkt het? | Consumentenbond".
  32. 1 2 3 4 Schmidt, Christine (10 June 2019). "Micropayments-for-news pioneer Blendle is pivoting from micropayments". Nieman Lab. Retrieved 11 June 2019.
  33. ↑ McMahan, Ty (7 July 2011). "EBay's Zong Deal: Mobile Payments Are All Fun & Games". WSJ Blogs: Venture Capital Dispatch.
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