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{{Short description|Financial transaction involving a very small sum of money}} |
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:''This article is about small payments. For small loans see [[Microcredit]]''. |
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{{Use dmy dates|date=September 2021}} |
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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. |
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'''Micropayments''' are means for transferring very small amounts of money, in situations where collecting such small amounts of money with the usual [[payment system]]s is impractical, or very expensive, in terms of the amount of money being collected. "Micropayment" originally meant 1/1000th of a US dollar,[http://www.marketconscious.com/dict3.htm][http://www.w3.org/Conferences/WWW4/Papers/246/], meaning a payment system that could efficiently handle payments at least as small as a tenth of a cent, but now is often defined to mean payments too small to be affordably processed by credit card or other electronic transaction processing mechanism. The use of micropayments may be called [[Microcommerce]]. |
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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.<ref>{{cite news| url=https://www.nytimes.com/2007/08/27/technology/27micro.html|title=In Online World, Pocket Change Is Not Easily Spent |work=The New York Times |date= 27 August 2007}}</ref> One problem that has prevented the emergence of micropayment systems is a need to keep costs for individual transactions low,<ref name="w3c"/> which is impractical when transacting such small sums<ref name="wired"/> even if the transaction fee is just a few cents. |
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==Introduction== |
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Generally, micropayment systems accumulate many micropayments, and collect the accumulated amount of money as one regular payment either before or after the transactions. Examples of situations where micropayment systems (according to the broad definition) are often used in the [[United States]] include [[public transportation]] systems, university student dining rooms, and tolls on roads. These are all areas where it would be very impractical to collect the price of the service from the consumer each time a service is rendered. However, these systems have a granularity of no less than one cent: they fit the currently popular but not the original definition of micropayments. |
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==Definition== |
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There has been a great deal of recent innovation in micropayment systems, in order to facilitate providing content for a fee over the Internet. Many payments are made with credit cards, but processing a credit card payment typically costs the merchant a fee with a minimum on the order of 20¢ plus a few percent of the amount of the charge. Clearly charging a customer an amount less than the fee is impossible. |
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There are a number of different definitions of what constitutes a micropayment. [[PayPal]] defines a micropayment as a transaction of less than £5<ref>{{Cite web|title = Get Paid Small Amounts Online with Micropayments|url = https://www.paypal.com/uk/webapps/mpp/micropayments|website = www.paypal.com|access-date = 12 July 2015}}</ref> while [[Visa Inc.|Visa]] defines it as a transaction under 20 Australian dollars.<ref name=payclick>{{cite web | archive-url = https://web.archive.org/web/20110706110908/https://www.payclick.com.au/getattachment/e693f4a2-3e0b-4811-841e-5c43ef5aa19b/payclick-Press-Release-24-June-2010.aspx | archive-date = 6 July 2011 | url = https://www.payclick.com.au/getattachment/e693f4a2-3e0b-4811-841e-5c43ef5aa19b/payclick-Press-Release-24-June-2010.aspx | title = Visa launches new way to pay online | website = payclick.com.au | date = 24 June 2010 }}</ref>{{verify source|date=July 2015}} |
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==History== |
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These new micropayment systems are the result of an evolutionary process among Internet content providers. In the early days of the [[World Wide Web]], content would usually be made available for free by organisations such as [[universities]]. |
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The term was coined by [[Ted Nelson]],<ref>{{cite news|title=The Babbage of the web|url=http://www.economist.com/node/442985|access-date=13 November 2017}}</ref> 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.<ref>{{cite web|last1=Nelson|first1=Ted|title=A THOUGHT FOR YOUR PENNIES: MICROPAYMENT AND THE LIBERATION OF CONTENT|url=http://transcopyright.org/hcoinRemarks-D28.html|access-date=13 November 2017|url-status=usurped|archive-url=https://web.archive.org/web/20171113165908/http://transcopyright.org/hcoinRemarks-D28.html|archive-date=13 November 2017}}</ref> Micropayments, on the Web, were initially devised as a way of allowing the sale of online [[Content (media and publishing)|content]] and as a way to pay for very low cost network services.<ref>{{cite CiteSeerX | last1 = Hardy | first1 = Norm | last2 = Tribble | first2 = Dean|title=The Digital Silk Road|citeseerx = 10.1.1.53.6972|date=1993}}</ref> They were envisioned to involve small fractions of a cent, as little as US$0.0001<ref>{{cite book|author=Theerasak Thanasankit|title=E-commerce and Cultural Values|url=https://books.google.com/books?id=blYKtUbhR1MC&q=micropayment+defined+cent&pg=PA225|date=2003|isbn=9781591400561}}</ref> to a few cents.<ref name="wired">{{cite web | url = https://www.wired.com/science/discoveries/news/1999/11/32092 | title = Toward a Click-and-Pay Standard | website = wired.com | date = 11 March 1999 }}</ref> Micropayments would enable people to sell content on the Internet<ref name="wired"/> and would be an alternative to advertising revenue.<ref name="w3c draft origins">{{cite web | url = http://www.w3.org/TR/Micropayment-Markup/#origin-goals | title = Common Markup for micropayment per-fee-links 1.1 Origin and Goals | work = W3C Working Draft | date = 25 August 1999 }}</ref> |
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With phenomenal growth of the [[Internet]] people soon began to seek various means of earning [[money]] from content. [[Advertising]] is one such form of revenue. Content would be offered for free, with accompanying ads or links to sponsor sites. Other content providers have also experimented with [[subscriptions]], where people would pay for access to content for some period of [[time]]. A third form of revenue comes in the form of [[donation]]s solicited by the content provider. |
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During the late 1990s, there was a movement to create microtransaction [[Technical standard|standards]],<ref name="wired"/> 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 [[List of HTTP status codes|HTTP error codes]].<ref name="w3c">{{cite web | url = http://www.w3.org/ECommerce/Micropayments/ | title = Micropayments Overview | website = w3c.com }}</ref> The W3C has since stopped its efforts in this area,<ref name="w3c"/> and micropayments have not become a widely used method of selling content over the Internet. |
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===Early research and systems=== |
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Micropayments present a relatively recent [[innovation]] in the online revenue stream. The basis of micropayments would be to maintain and take advantage of the very high volume of viewers by offering content for a very low [[price]]. For example, a webcomic author would make his online comic book available for 25¢ (USD). Other variations on the idea propose charging fractions of cents (that is, smaller than the smallest possible amount of [[hard currency]]) for equally fractional amounts of contents, for example, a tenth of a cent per single web page in an online magazine. |
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In the late 1990s, established companies like [[IBM]] and [[Compaq]] had microtransaction divisions,<ref name="wired"/> and research on micropayments and micropayment [[Internet standard|standard]]s was performed at [[Carnegie Mellon]] and by the [[World Wide Web Consortium]]. |
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====IBM Micro Payments==== |
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==The Internet and the "free rider" problem== |
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IBM's Micro Payments was established {{circa|1999}},<ref>{{cite web|url=http://www.hrl.il.ibm.com/mpay |title=Archives of IBM Micro Payment sites |url-status=dead |archive-url=https://web.archive.org/web/19990203132612/http://www.hrl.il.ibm.com/mpay/ |archive-date=3 February 1999}}</ref> 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".<ref>{{cite web|archive-url=https://web.archive.org/web/20000830082507/http://www-4.ibm.com/software/webservers/commerce/payment/mpay/ |archive-date=30 August 2000 |url=http://www-4.ibm.com/software/webservers/commerce/payment/mpay/ |title=IBM Micro Payments |url-status=dead }}</ref> |
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Economists define a "[[public good]]" as one which can be consumed or used by an unlimited number of people at no additional cost to the provider. Radio broadcasting produces a public good. A radio program is produced at a fixed cost, but an unlimited number of people within the reception area can receive that program. When one additional listener hears the program, no additional cost is incurred by the broadcaster for that listener. For this reason, sale of program advertising by broadcasters can produce income without excessive cost. If a listener hears a radio program, but does not respond to its advertising, no additional cost results. A listener who hears the radio program but does not purchase advertised products is a "[[Free rider problem|free rider]]." |
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====iPIN==== |
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In contrast, publishers of paper magazines and newspapers incur an additional cost to provide the publication to each additional reader. Some publishers impose a purchase price on that reader to defer the additional publication cost. Therefore, newspapers and magazines which must be purchased are not public goods and their publishers solve the free rider problem by charging for each copy of their printed product. Some magazines and newspapers are provided without charge. The publishers of these "free" publications obtain revenue only from sale of [[advertising]]. These publications usually have limited and narrowly targeted readerships which are most likely to respond to the advertising in the free publications. Also, publications which bear a purchase price may be printed on glossy paper and have attractive color photos and illustrations, whereas free publications may be produced at a lesser cost, omitting some or all of these features. |
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An early attempt at making micropayments work, iPIN was a 1998 [[venture capital|venture-capital]]-funded startup that provided services that allowed purchasers to add incremental micropayment charges to their existing bill for Internet services.<ref name=smallart>{{cite web|last=Johnson|first=Amy Hellen|title=iPIN|url=http://www.computerworld.com/s/article/44837/iPIN|work=ComputerWorld.com|date=15 May 2000|publisher=ComputerWorld|access-date=4 January 2012}}</ref> Debuting in 1999, its service was never widely adopted.<ref name=smallart/> |
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====Millicent==== |
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Many [[Internet]] sites have attempted to provide content as a free public good with the cost of that content paid for only by advertising. These sites provide a non-public good without charge. Because of bandwidth costs, this approach has often failed. Online content cannot be provided at a fixed cost, as with broadcast programs, because each additional person who accesses a particular web site imposes more bandwidth cost on the operator. Although the additional incremental cost could be very small (depending on the file size of the site's content), the cost may accumulate rapidly depending on the number of people who access the site. Therefore, many sites have suffered losses from high bandwidth costs disproportionate to available advertising revenue, since many people access the content, impose a bandwidth cost, but never respond to the advertising banners/pop ups. Many sites have failed for this reason, while others have resorted to charging subscription fees or increasing the ratio of advertising to the amount of content provided (reducing the overall quality of the site). |
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Millicent, originally a project of [[Digital Equipment Corporation]],<ref name="centcompaq"/> was a micropayment system that was to support transactions from as small as 1/10 of a cent up to $5.00.<ref>{{cite web | archive-url = https://archive.today/19970601153143/http://www.millicent.digital.com/ | archive-date = 1 June 1997 | url = http://www.millicent.digital.com/ | title = Millicent }}</ref> It grew out of The Millicent Protocol for Inexpensive Electronic Commerce, which was presented at the 1995 [[World Wide Web Conference]] in [[Boston]],<ref>{{cite web|archive-url=https://archive.today/19970707014236/http://www.millicent.digital.com/html/whatsnew.html |archive-date=7 July 1997 |url=http://www.millicent.digital.com/html/whatsnew.html |work=Millicent |title=What's New |date=June 1997 |url-status=dead }}</ref> but the project became associated with [[Compaq]] after that company purchased Digital Equipment Corporation.<ref name="centcompaq">{{cite web | url = http://news.cnet.com/Compaq-to-license-digital-cash-technology/2100-1017_3-219482.html | title = Compaq to license digital cash technology | website = cnet.com | date = 23 December 1998 }}</ref> The payment system employed [[symmetric cryptography]].<ref>{{cite web | url = http://www.ietf.org/proceedings/46/46th-99nov-ietf-129.html | title = 2.6.10 Micro Payments (micropay) bof Current Meeting Report | date = 8 November 1999 | publisher = Internet Engineering Task Force | website = ietf.org }}</ref> |
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====NetBill==== |
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Proponents of the micropayment [[business model]] believe that micropayments will solve the free rider problem for sites that are attempting to depend solely on advertising, and, that such a system is a refinement for sites that have resorted to charging subscription fees. |
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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.<ref>{{cite web | archive-url = https://web.archive.org/web/19970613041513/http://www.ini.cmu.edu/netbill/ | archive-date = 13 June 1997 | url = http://www.ini.cmu.edu/netbill/ | title = The NetBill Project }}</ref> It featured pre-paid accounts from which micropayment charges could be drawn.<ref>{{cite web|archive-url=https://web.archive.org/web/20021009224400/http://www.netbill.com/netbill/about.html |archive-date=9 October 2002 |url=http://www.netbill.com/netbill/about.html |title=About NetBill |url-status=dead }}</ref> NetBill was initially absorbed by CyberCash in 1997 and ultimately taken over by PayPal.<ref>{{cite web|title=CyberCash press release |url=http://www.netbill.com/netbill/press_release.html |access-date=12 January 2015 |url-status=unfit |archive-url=https://web.archive.org/web/19970611050302/http://www.netbill.com/netbill/press_release.html |archive-date=11 June 1997 }}</ref> |
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==Online gaming== |
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On the other hand, detractors of the micropayment business model believe that the subscription-based system is preferable and that micropayments generate less revenue than advertising. |
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{{main|Microtransaction|Virtual economy|Free-to-play|Downloadable content}} |
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The term micropayment or microtransaction is sometimes attributed to the sale of [[virtual goods]] in [[online game]]s, most commonly{{Citation needed|date=July 2018}} involving an [[in-game currency]] or service bought with real world money and only available within the [[online game]]. |
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==Recent systems== |
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Current systems either allow many micropayments but charge the user's phone bill one lump sum or use funded wallets. |
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Micropayments are used in some [[massively multiplayer online role-playing game]]s (MMORPGs).<ref>[http://www.mmorpg.com/gamelist.cfm/show/all Game list on MMORPG.com], features a column specifying which games use micropayments.</ref> These are typically free to play games with no monthly fee, which offer players the possibility of purchasing in-game currency redeemable for items. These items are often more powerful than those that can be obtained by "free" players, or offer an advantage or feature otherwise unavailable. An example would be a set of armor more effective than that obtained from generic in-game vendors or enemies, or a potion that allows a character to earn more experience points per quest completed or enemy slain, thereby progressing faster than usual. |
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===Dropp=== |
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Numerous MMORPGs use this system to some extent, though the details of what can be obtained and at what price will vary depending on the game. Some of these games are: [[Cabal Online]], [[Rappelz]], [[Sword of the New World]], [[Flyff]] and [[Maple Story]]. |
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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.<ref>{{cite web|url=https://dropp.cc|title=Dropp Micropayments|website=dropp.cc|access-date=28 July 2021}}</ref> 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. |
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===Flattr=== |
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{{Main|Flattr}} |
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One of the major drawbacks of micropayments is getting the funds from the customer in the first place. The easiest solution is to charge the customer's [[credit card]] for the amount they have purchased the content for. Billing a customer's credit card for $1.00USD is fiscally irresponsible to the micropayment provider, given that there are certain base transaction charges for using the credit card network. A working system used by companies like [http://Bee-Tokens.com Bee-Tokens] bills the customer's credit card for a fixed amount of [[token]]s where the user can then spend on websites accepting the Bee-Tokens "microcurrency". |
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Flattr is a micropayment system (more specifically, a microdonation system) which launched in August 2010.<ref name="techcrunch">{{cite news|url=https://techcrunch.com/2010/08/12/flattr-opens-to-the-public-now-anybody-can-like-a-site-with-real-money/|title=Flattr opens to the public, now anybody can 'Like' a site with real money|first=Steve|last=O'Hear|work=TechCrunch Europe|date=12 August 2010|access-date=13 August 2010}}</ref> Actual bank transactions and overhead costs are involved only on funds withdrawn from the recipient's accounts. |
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===Jamatto=== |
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Microcurrency is a kind of virtual currency, or [[scrip]], that is purchased in bulk, frequently with greater discounts for larger purchases. The currency is then spent, in a separate transaction, on whatever items are available for purchase. Frequently, an online retailer or other provider will set up their own form of microcurrency; for example, [[Xbox Live Marketplace]] uses "Microsoft Points", which can only be spent in the Xbox Live Marketplace. One advantage of using microcurrency is that no financial transaction occurs when a consumer spends points; money is paid up front in a single transaction. |
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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<ref>{{cite web|url=https://jamatto.com/#/BusinessCode|title=Jamatto Micropayments|website=jamatto.com|access-date=1 December 2017}}</ref> Jamatto is in use by newspapers across three continents. |
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===M-Coin=== |
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Another working system employs a second account such as [http://www.indiekarma.com/ indieKarma] to use for micropayments while credit cards are used to dump lump sums into the second account. This prevents the fiscal irresponsibility of charging micropayments to the credit card. It also allows customers a new layer of privacy by only letting one company (the second account) access to the customer's credit card information. |
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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.<ref>{{cite web |url=http://mobilemarketingmagazine.com/content/timwe-launches-m-coin-brand-0 |title=MCoin Product Lines – Mobile Marketing magazine |publisher=Mobile Marketing Magazine |date=30 June 2011 |access-date=2 July 2011 |url-status=dead |archive-url=https://web.archive.org/web/20110724175433/http://mobilemarketingmagazine.com/content/timwe-launches-m-coin-brand-0 |archive-date=24 July 2011 }}</ref> |
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===PayPal=== |
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One additional strategy to deal with the overhead of the credit card fees is to consolidate multiple micropayment transactions within a particular time period into a single credit card transaction. This is the approach used by [[iTunes]], which bills customers weekly. |
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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.<ref>{{cite web | url=https://techcrunch.com/2010/10/26/paypal-unveils-micropayments-for-digital-goods-facebook-signs-up/ | title=PayPal Unveils Micropayments For Digital Goods, Facebook Signs Up | publisher=AOL | work=techcrunch.com | date=26 October 2010 | access-date=23 November 2012 | last = Rao | first = Leena}}</ref> As of 2013, the service is offered in selected currencies only.<ref>{{cite web | url=http://www.paypalobjects.com/IntegrationCenter/ic_micropayments.html | title=Micropayments | publisher=PayPal | work=PayPal Integration Center | access-date=23 November 2012}}</ref> 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).<ref>[https://www.thebalancesmb.com/increase-profits-with-paypal-micropayments-1140571 Article on Micropayments]</ref> |
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===Swish=== |
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{{Unreferenced section|date=June 2019}} |
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[[Swish (payment)|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. |
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Similar apps with zero fee for small instant private transactions, [[Vipps]] and [[MobilePay]] have become popular in Norway and Denmark. |
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Some online [[artists]] are strongly in favor of micropayments, as they offer a means of recouping the cost of online publishing, and if they are sufficiently popular, of making a [[profit]]. Currently, successful artists are punished by their [[popularity]] because this popularity requires them to pay for increasingly large amounts of [[bandwidth]]. The argument by artists in favour of micropayments is firstly that such schemes would free them from [[sponsorship]] and [[advertising]], which allows more independence for their art; and secondly that the possibility of earning a living through their work would allow them to produce more and higher [[quality]] work. |
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===Tikkie=== |
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The iTunes model is another popular example of a micropayment success story. Users are free to download and use the iTunes music software from [http://www.apple.com Apple], but also have the option to buy individual songs or videos starting at $1.00. In January 2006 the music download average for iTunes was [http://www.signonsandiego.com/news/business/20060624-9999-1b24digital.html 17.56 million] per week. iTunes works around the complaint that younger people without credit cards will be turned off, since parents can actually set a weekly allowance to how much music their teen can download. Furthermore, with videos, television, and audiobooks, the selection continues to grow. |
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[[:nl: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.<ref>{{Cite web|url=https://www.tikkie.me/bedrijven/veelgestelde-vragen|title=Tikkie}}</ref> |
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Some [[MMORPG]]s have experimented with a micropayment system as an alternative to traditional subscription-based payment, providing the "basic game" for free, but requiring some features to be paid for with microcurrency that ultimately comes from real-life payments. In particular, [[Yohoho! Puzzle Pirates]] has seen considerable success with the system. The developers, [[Three Rings Design]], plan on similarly implementing micropayments in their new game [[Bang! Howdy]] [http://games.slashdot.org/games/06/03/23/0750228.shtml]. Other online games, such as [[Entropia Universe]], [[Second Life]], [[Roma Victor]] and the Korean [[GunBound]], use a similar business model. |
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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. |
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With the launch of the [[Xbox 360]], [[Playstation 3]] and [[Wii]] gaming consoles, micropayments are being pushed to a whole new level. All three gaming systems will feature micropayments as a way to generate income and also add value and content to the games and features they offer. For example, purchasing extra maps, levels, characters, weapons, costumes etc... is now commonplace. If you are playing a racing game and wish to drive the latest vehicle released a week ago, it will now be possible to pay a few dollars and download the car to the game system. |
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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.<ref>{{Cite web|url=https://tweakers.net/nieuws/151480/nederlanders-betalen-bijna-200000-tikkies-per-dag.html|title = Nederlanders betalen bijna 200.000 Tikkies per dag}}</ref> In 2017, the average payment request was EUR 12.<ref>{{Cite web|url=https://www.rtlnieuws.nl/tech/artikel/13021/waarom-gratis-betaal-app-tikkie-zo-waardevol-voor-abn|title = Waarom gratis betaal-app Tikkie zo waardevol is voor ABN|date = 8 March 2017}}</ref> 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.<ref>{{Cite web|url=https://www.consumentenbond.nl/betaalrekening/tikkie|title = Tikkie: Hoe werkt het? | Consumentenbond}}</ref> 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. |
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==Criticism== |
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Detractors generally argue that micropayments would cause too much inconvenience for users of content. They point to traditional customer behavior that generally prefers fixed-price subscriptions to variable costs of low price granularity. They invoke a [[mental accounting|mental transaction cost]] argument: each price, no matter how small, carries a burden of deciding if the content is worth that price; accumulated over a large amount of content, this burden would pose an extreme inconvenience to the users. Markets require this effort of customers to map their preferences and budget to prices, and also to comparison shop, if they are to do their work of rationing scarce resources or solving free rider problems. But this effort is not worthwhile below a certain price granularity. This argument is more relevant to the older definitions of micropayment (payments smaller than a [[penny]]) than it is for price granularities of one cent or more often tolerated in traditional markets. Thus, many critics agree that there is a niche for payment at the traditional price granularity of between a penny and a few dollars, as [[PayPal]] has demonstrated, but not below that, and point to the many failures of systems targeted at sub-penny payments. |
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=== Blendle === |
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Thus the mental transaction cost critique is primarily aimed at, for example, many proposed pay-per-click schemes and "nano-payment" schemes such as the [[Digital Silk Road]], and renders irrelevant savings in computational transaction costs in systems like [[Millicent (micropayment)|Millicent]]. |
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{{Main|Blendle}} |
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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 Foundation for Journalism|Nieman Lab]] to describe it as a "micropayments-for-news pioneer".<ref name=":62">{{Cite web|url=https://www.niemanlab.org/2019/06/micropayments-for-news-pioneer-blendle-is-pivoting-from-micropayments/|title=Micropayments-for-news pioneer Blendle is pivoting from micropayments|last=Schmidt|first=Christine|date=10 June 2019|website=Nieman Lab|access-date=11 June 2019}}</ref> It operates in the Netherlands, Germany and the US.<ref name=":62" /> In 2019, five years after its launch, it announced that it would change its business model away from micropayments to premium subscriptions.<ref name=":62" /> Nieman Lab commented that "micropayments keep not panning out".<ref name=":62" /> |
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==Obsolete systems== |
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Another criticism of Internet micropayments is the cost of exception handling. In the physical world, when putting coins in a parking meter or vending machine consumers have some expectation that the transaction may fail. Presumably people factor the odds of frustration into their purchasing decision. In the digital world, consumers expectations for quality service can far exceed the tiny price of admission. A single consumer complaint (or even a [[chargeback]]) may cost $1 to $20 to resolve, effectively wiping out a merchant's profit from dozens, or even hundreds of sales. |
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===Zong=== |
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[[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.<ref>{{cite news|url=https://blogs.wsj.com/venturecapital/2011/07/07/ebays-zong-deal-mobile-payments-are-all-fun-games/|title=EBay's Zong Deal: Mobile Payments Are All Fun & Games|last=McMahan|first=Ty|date=7 July 2011|publisher=WSJ Blogs: Venture Capital Dispatch}}</ref> |
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Almost all real-world examples touted by micropayment supporters actually involve a larger granularity than the traditional penny. The minimal granularity in Yoho! Puzzle Pirates is a "doubloon", which costs between $0.20 and $0.25. [[iTunes]] can be seen as a failure of micropayments since Apple chose a very large price granularity: one dollar, far higher than the traditional granularity of one cent. This confirms a critic prediction that tolerable price granularity is somewhat larger on the Internet than in traditional markets because the average budget of the Internet shopper is higher, and such a shopper puts in less shopping effort per dollar. This effect will be reduced as more poor people get on the Internet for services in which the poor form a substantial part of the customer base. |
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At least one critic has suggested that the mental transaction cost problem may be solvable in some circumstances, via innovative user interfaces that input persistent customer preferences. However, micropayment vendors have generally failed to address this problem, choosing instead to focus on what critics see as irrelevant reductions in computational transaction costs. |
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Another criticism is that [[minor (law)|minors]] and others without credit cards may be deterred; even in a [[developed country]] where credit cards are widely held, borrowing a friend’s credit card is a further inconvenience. |
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«In the videogame forum, [http://www.gamespot.com critics] argue that the micropayment structure may encourage developers to release games with (initially) less content, only to come back and charge even more money to allow the use of all the features.» |
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This is a problem with market drug/games, not micropayments. |
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==See also== |
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* [[Mobile phone micropayment]] |
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* [[BitPass]] |
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* [[Cherry Credits]] |
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* [[Peppercoin]] |
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==References== |
==References== |
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==External links== |
==External links== |
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* [http://www.w3.org/TR/Micropayment-Markup W3C Micropayment Working Group] |
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===Implementation=== |
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* {{cite web | url = http://wwwhome.cs.utwente.nl/~pras/publications/2005-I3E-2ndgeneration-payments.pdf | title = Second generation micropayment systems: lessons learned | first = Robert | last = Parhonyi | access-date = 28 March 2010 | archive-url = https://web.archive.org/web/20170809115618/http://wwwhome.cs.utwente.nl/~pras/publications/2005-I3E-2ndgeneration-payments.pdf | archive-date = 9 August 2017 | url-status = dead }} |
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# [http://www.w3.org/TR/Micropayment-Markup W3C Micropayment Working Group] |
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# [http://www.mollie.nl/geavanceerd/micropayments/ivr/ Implementation of Mollie Micropayments (Dutch)] |
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===The micropayment debate=== |
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# [http://www.useit.com/alertbox/980125.html The Case for Micropayment - Jakob Nielsen] |
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# [http://www.openp2p.com/pub/a/p2p/2000/12/19/micropayments.html The Case against micropayments - Clay Shirky] |
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# [http://www.fourmilab.ch/documents/digital-imprimatur/ The Digital Imprimatur, ''How big brother and big media can put the Internet genie back in the bottle'' by John Walker]. |
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# [http://szabo.best.vwh.net/micropayments.html The Mental Accounting Barrier to Micropayments - Nick Szabo] |
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# [http://www.scottmccloud.com/home/essays/2003-09-micros/micros.html Misunderstanding Micropayments - Scott McCloud] |
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#[http://www.simpleweb.org/nm/research/results/publications/parhonyi/parhonyi_2ndgeneration@i3e2005.pdf Second generation micropayment systems: lessons learned - Robert Parhonyi] |
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Incomplete: |
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==Criticism== |
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Hard to implement? |
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The "mental transaction cost" argument |
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==Counterarguments== |
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There are counterargs to the critics, but is there a fair, concise way to present this? I suppose the primary interest of this article is for the reader to inform self about what micropayments are; don't really want to dig too deep into the debate, eh? |
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Yes, we do. We want to provide readers with as much useful information possible. This would include problems with the system as well as likely solutions. The problem is that some systems actually work with few problems (or vice versa), so some idiots would cry foul on the account of being "biased", when in fact we're being realistic. |
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==Implementations== |
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Bitpass? |
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European variants with mobile phones? |
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iTunes - $1 a song: micropayments? |
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Some implementations? |
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[[Category:Electronic commerce]] |
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[[Category:Payment systems]] |
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[[Category:Marketing]] |
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[[ |
[[Category:Micropayment| ]] |
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[[fr:Micropaiement]] |
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[[it:Micropagamento]] |
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[[he:מיקרו-תשלום]] |
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[[fi:Mikromaksu]] |
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Latest revision as of 17:56, 3 January 2025
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.
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
[edit]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
[edit]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
[edit]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
[edit]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
[edit]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
[edit]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
[edit]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
[edit]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
[edit]Current systems either allow many micropayments but charge the user's phone bill one lump sum or use funded wallets.
Dropp
[edit]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
[edit]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
[edit]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
[edit]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
[edit]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
[edit] |
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
[edit]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
[edit]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
[edit]Zong
[edit]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]
References
[edit]- ^ "In Online World, Pocket Change Is Not Easily Spent". The New York Times. 27 August 2007.
- ^ a b c "Micropayments Overview". w3c.com.
- ^ a b c d e "Toward a Click-and-Pay Standard". wired.com. 11 March 1999.
- ^ "Get Paid Small Amounts Online with Micropayments". www.paypal.com. Retrieved 12 July 2015.
- ^ "Visa launches new way to pay online". payclick.com.au. 24 June 2010. Archived from the original on 6 July 2011.
- ^ "The Babbage of the web". Retrieved 13 November 2017.
- ^ Nelson, Ted. "A THOUGHT FOR YOUR PENNIES: MICROPAYMENT AND THE LIBERATION OF CONTENT". Archived from the original on 13 November 2017. Retrieved 13 November 2017.
- ^ Hardy, Norm; Tribble, Dean (1993). "The Digital Silk Road". CiteSeerX 10.1.1.53.6972.
- ^ Theerasak Thanasankit (2003). E-commerce and Cultural Values. ISBN 9781591400561.
- ^ "Common Markup for micropayment per-fee-links 1.1 Origin and Goals". W3C Working Draft. 25 August 1999.
- ^ "Archives of IBM Micro Payment sites". Archived from the original on 3 February 1999.
- ^ "IBM Micro Payments". Archived from the original on 30 August 2000.
- ^ a b Johnson, Amy Hellen (15 May 2000). "iPIN". ComputerWorld.com. ComputerWorld. Retrieved 4 January 2012.
- ^ a b "Compaq to license digital cash technology". cnet.com. 23 December 1998.
- ^ "Millicent". Archived from the original on 1 June 1997.
- ^ "What's New". Millicent. June 1997. Archived from the original on 7 July 1997.
- ^ "2.6.10 Micro Payments (micropay) bof Current Meeting Report". ietf.org. Internet Engineering Task Force. 8 November 1999.
- ^ "The NetBill Project". Archived from the original on 13 June 1997.
- ^ "About NetBill". Archived from the original on 9 October 2002.
- ^ "CyberCash press release". Archived from the original on 11 June 1997. Retrieved 12 January 2015.
- ^ "Dropp Micropayments". dropp.cc. Retrieved 28 July 2021.
- ^ 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.
- ^ "Jamatto Micropayments". jamatto.com. Retrieved 1 December 2017.
- ^ "MCoin Product Lines – Mobile Marketing magazine". Mobile Marketing Magazine. 30 June 2011. Archived from the original on 24 July 2011. Retrieved 2 July 2011.
- ^ Rao, Leena (26 October 2010). "PayPal Unveils Micropayments For Digital Goods, Facebook Signs Up". techcrunch.com. AOL. Retrieved 23 November 2012.
- ^ "Micropayments". PayPal Integration Center. PayPal. Retrieved 23 November 2012.
- ^ Article on Micropayments
- ^ "Tikkie".
- ^ "Nederlanders betalen bijna 200.000 Tikkies per dag".
- ^ "Waarom gratis betaal-app Tikkie zo waardevol is voor ABN". 8 March 2017.
- ^ "Tikkie: Hoe werkt het? | Consumentenbond".
- ^ a b c d Schmidt, Christine (10 June 2019). "Micropayments-for-news pioneer Blendle is pivoting from micropayments". Nieman Lab. Retrieved 11 June 2019.
- ^ McMahan, Ty (7 July 2011). "EBay's Zong Deal: Mobile Payments Are All Fun & Games". WSJ Blogs: Venture Capital Dispatch.
External links
[edit]- W3C Micropayment Working Group
- Parhonyi, Robert. "Second generation micropayment systems: lessons learned" (PDF). Archived from the original (PDF) on 9 August 2017. Retrieved 28 March 2010.