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Whatever Happened to Micropayments?
prostoalex writes "Remember Flooz? Or Beenz? With a few notable successes (PayPal, and that's about it) online micropayment industry is saving its success stories for future generations. New York Times reports about two nascent micropayment systems, one coming out of Stanford, one out of MIT, that are supposed to help the content producers and Internet users to engage in less-than-a-dollar financial transactions without huge overhead costs, so typical of credit card payments. BitPass requires you to purchase a virtual debit card with a certain amount on it to pay for products and services, and PepperCoin consolidates numerous micropayments into one bill that is then split between the content providers that managed to sell their product to the Internet user." I still believe that single penny transactions will revolutionize the net.
I still believe that single penny transactions will revolutionize the net.
/. would allow us to quantify the value of the elusive first post:
Plus, a micropayment system on
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at $0.01 per Slashdot page hit, an FP would be worth $3.97.
I'm much funnier now that I'm a subscriber.
I'll bet ya $0.000838 that it's not over yet.
Je t'aime Stéphanie
Call me an old curmudgeon but I think micropayments are just another new way to be (pardon the pun) nickel and dime'd to death. My bank already does it with service charges, my phone company does it with every little "feature", my cell company does it, et al ad nauseum.
The only ones that will PROFIT!!! from this are the big companies pushing it on us.
Trolling is a art,
Whatever Happened to Micropayments?
I believe they fell through the cracks.
Eve Fairbanks says I drive a hybrid!LOL
Whenever you surf to an advertising-sponsored site you are paying.
I believe the problem with micropayments is the lack of a 'lender of last resort', namely a government backing the scheme. In countries where governments have shown an interest (Finland, Japan,...?) micropayments seem to work just like any other kind of virtual cash.
Certainly there is no technical hurdle to overcome: compared with giving someone your credit card and saying 'I trust you to take what I owe you and no more', and sending them a 'cheque' by email (PayPal) or by SMS (a system I wanted to make), it's clear that a payments system does not have to be perfect to succeed, it just needs backing from banks and government.
Presumably banks are wary of real micropayments because they make so much money from credit cards, the main alternative.
Presumably governments are wary of real micropayments because they see their tax bases being nuked.
I don't see either of these fundamentals changing soon.
PayPal succeeded because they found a niche that was opening at the time, and were were very good, very lucky, to exploit it fully. But without credit cards in the background, PayPal would never have worked.
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The problem with there being competing systems for MicroPayments is that consumers don't want to have multiple accounts (well at least I don't anyway).
Let's say Slashdot joins MicroPayment provider X, and New York Times Online joins MicroPayment provider Y, I need to have accounts with X and Y if those 2 websites happen to be in my favourites.
Interoperability needs to be sorted out right up front; otherwise no one company will be successful.
The obvious players are Visa and Mastercard. I suspect that they are just treading water until there is a whiff of possible competition, at which point they will swoop in together make MicroPayments happen between them.
The stupid names. "Flooz"? "Beenz"? And I'm not thrilled with "PepperCoin," either.
Paypal also had a lot of marketting muscle and a catchy name.
To top this off, Paypal also started to guaranty their purchases.
It also ended up being the way that Paypal was used for other payment services because of the debit card that allowed it to prosper. I would for instance use my Paypal card to pay Billpoint or PayDirect if it was offered. This would get me 1.5% back.
StormPay and C2it are the services frauds use. Bidpay is reasonable, but never use it to pay for anything just to be paid.
The author misses Paydirect, which controls Yahoo payments. This is a decent service and is in some ways a superior "eshopping cart" service. Many small websites or discount hardware websites use Yahoo stores and the PayDirect service.
I do agree with the author that "penny payments will revolutionize the internet though" - I see the internet broadband/wifi/otherwise being free in most cases within 10 years. I see ISPs as selling "credit cards" rather than subscriptions. These cards would allow you to send and receive email and view websites. The ISPs in turn act as a bank for websites such as Slashdot. Paying them for the number of views that have crossed their service say 1/100th of a cent for every page view.
I think email should cost 1 cent to send, 1 cent to receive. I think it should be 1 penny each page/email view or bulk 1000/100MB /views for $1 -- 10,000/ MB/ views $10 -- 100,000/MB / views $50 - therefore sites that want to remain free can, sites that want to charge can almost transparently.
Yell & scream & rant & rave... it's no use... you need a shaaaave ~ Bugs Bunny
What worked best was simply putting an inexpensive yearly fee in place. People pay once and can forget about worrying about any recurring charges or running up some kind of tab that will only come back and surprise them later.
After a year, more than half of them renew their accounts too. And just so they can have access to a giant database of humorous, strange, and twisted photos and media files. Go figure ...
Just make sure you put the decimal point in the corect place. You don't want to end up in a Federal Pound-Me-In-The-Ass prison.
Governments are supposed to be responcible for maintaining a robust and useful currency system. Supplying a robust currency system should be a slam dunk, no brainer extension of the current monetary system. Online, government secured currency is what is needed.
One of the reasons a 3 cent transaction is doable is that there is not a business making the transaction unworkable by adding a fee. The voter is once again uncouncious, failing to force government to live up to its obligations.
HenryJamesFeltus.com
I've started leaving the spare change when I buy little stuff like coffee, takeout food, and trinkets at small shops. Imagine what would happen to the economy if everybody left their 37 cents after buying coffe? The people working minimum-wage at the coffee shops would be making over $30/hour! I think 'micropayments' in real life (not online) could seriously revolutionize the economy, it would finally give the poorest amongst us the ability to make decent (and tax-free) earnings.
"Sometimes, I think Trent just needs a cup of hot chocolate and a blankie." -Tori Amos on Nine Inch Nails
And the answer is, they will *never* happen. read all about it here. In that article, Clay says so much, so perfectly, that I won't quote any of it--just go and read the whole thing. OK, I can't resist. One of his points is micropayments have too much "user overhead"--you have to make a descision for literally every penny you spend, and that alone makes it not worth it. As he says, the user is getting conflicting messages: "This is worth so much you have to decide whether to buy it or not" and "This is worth so little that it has virtually no cost to you."
Dear Slashdot: next time you want to mess with the site, add a rich-text editor for comments.
To summarize, when the cost of clicking a link is only time (how long will it take to load that link on my 28.8 modem), its a relatively simple decision. When its both time and money, a judgement has to be made. Sure, for a penny a page, one might not worry about it, but nobody's going to make money on a penny a page, no matter what "they" say; that only works on click-rates the size of CNN, MSNBC, Slashdot, source-forge, etc. And even then, when they see "the bill", it'll be like getting their first credit card bill and having no idea just how much they "spent" online...then they'll be reconsidering each and every link and users don't want to do that.
Users surf or they don't. If you had to pay a per-minute charge for doing real surfing in the pacific ocean, you wouldn't surf, so (extending the metaphore) why would you do it at home? There's a reason AOL and all the other ISPs got rid of their traditional per-minute charges and people buy cell phone and long-distance plans with max minutes instead of per-minute charging; the variable at the end of the month isn't worth the hassle.
"But remember, most lynch mobs aren't this nice." (H.Simpson)
-- Joe
The big problem with Shirky's analysis is that he makes no distinction between payments of, say, half a cent, and payments of a dollar or more. And that's a major flaw in his argument.
In the real world, Shirky's argument translates to: "No one will buy a candy bar for 50 cents because they will be paralyzed by the user overhead." And, of course, we know this wrong. The candy industry (just to give an example) makes millions of dollars of profit a year selling 50 cent candy bars.
Likewise, there is a legitimate zone of value for digital content that falls between a dime and a couple bucks. 50 cents for an online comic you like, or for a song from a band you want to support, isn't any different than 50 cents for a candy bar.
Micropayments are just payments. And I think it'll be funny if, in a couple years, the artists and writers and bands who are making money off of micropayments can read Clay's article and have a good laugh.
He who refuses to do arithmetic is doomed to talk nonsense.
I've been wondering about this since it opened... and I haven't had my account long enough to find out for myself. Maybe $0.99 isn't a micropayment, but it certainly is a minipayment.
I've been hearing for years that the cost of handling credit card payments makes it impractical to use it for purchases of less than about $10. So how does Apple do this?
Certainly a big appeal of the Music Store is that you pay only for what you use and are NOT saddled with an automatic $5.95 or $8.95 per month.
Do they batch them? Do they actually lose money on someone who only buys one song a month, and gamble that most users will buy more than that?
"How to Do Nothing," kids activities, back in print!
I remember reading about this system. What they do is actually pool your mico transations and charge at the end of the billing period instead of instantly charging you when you make the purchase. Apple is gambling that you'll buy enough stuff during the billing period to make the transaction fee charged to Apple palatable.
When you contest payment with your bank, what happens? Well, you talk to an actual live human being, who will do actual human things, and make a decision on whether to refund you the money and whether to prosecute a third party. And your transaction fees pay his salary.
What happens when you contest something with PayPal? You drop them an email (good luck trying to talk to anyone), and then they freeze your account, sieze (i.e. spend) your money, and (if they're feeling particularly communicative) tell you to go screw yourself. They do that not because they're evil (although they probably are) but because they simply don't make enough margin on their transactions to be able to afford to investigate them, and because they know that it's not worth anyone's time to sue them, even in small claims court, for the contested amounts.
Now, when the transaction value drops to 1 cent, what's the best case margin on that? You've got purchase and maintenance costs on your servers and database, plus bandwidth costs for those 128bit SSL encrypted transaction details that fly both ways. Half a cent? More if you handle a lot. A loss if you don't handle enough to amortize your setup costs.
Now, how many fraudulent transactions do you have to have - from a single source - before it's worth taking any action? It costs ten cents for a staffer to click on a button, so you're talking twenty transactions. If the staffer has to think at all, it's a hundred. If they have to do any investigatation at all - for example, to decide if a bunch of transactions are from a single source - it's thousands. If you want to hand it over to a lawyer or other third party, it's tens or hundreds of thousands.
But that's fantasy land, because it's not worth even recording the details of the transaction that would allow you to decide if it was fraudulent or not. The logs themslves would take a huge chunk out of your profit. You'd simply have to trust the referrer.
Well, that's not working out too well for credit cards right now, but at least cc issuers can pass back all the costs to online retailers for credit card fraud.
But if it's not worth your while even retaining transaction records for micropayments, or to investigate fraud after the fact, how are you going to protect themselves from fraud?
I suspect that you're not. It comes down to the equation of whether it's worth anyone's time to crack the system. Well, as thousands of open source projects, white hat hobbyist hackers, and karma systems show, lots of people don't put a dollar value on their time. And given that the chances of being caught are minimal, well, why not give it a go? After all, it's only avoiding a penny a time. Who can that hurt?
Any popular micropayment system will (I suggest) be defrauded, and the costs will come right out of the payment backer's pocket. We've seen how PayPal deals with that; ignore it. Don't answer the 'phones. Freeze the account, and spend the money in it. With micropayments, who's going to even bother complaining? And if they do, how much are they going to have in their account? $5? It's barely even worthwhile seizing that, and not worthwhile at all if you have to send or even read a letter.
There is simply no compelling reason for anyone to manage micropayments, other than as a tool of desperation to prop up a flagging or non-existent business model (*cough* slashdot *cough*). There's precious little profit to be made from it, and a lot of opportunity to be scammed so badly that you won't even realise that you're bankrupt until you total the figures at the end of the year and find out that most of your payments came from Mr M. Mouse.
I suspect that it's good old fashioned economics that are stopping any of the big financial institutions from implementing mi
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