Slashdot Mirror
The March Towards Micropayments
MattW writes "It's been well over a year since Ron Rivest's company Peppercoin was introduced on Slashdot. Now, the AP is reporting that Peppercoin 2.0 is here. Peppercoin's website indicates that version 2.0 pays merchants exactly what they charged, instead of with cryptographically signed tokens which may or may not sum out to exactly the expected charges. This looks like the technology that will enable credit card acceptance in vending machines and video games, but may not solve the need for truly "micro" payments, like paying $.005 for a page view."
discount schemes for frequent users of a site
Interesting point, but slashdot is kinda already somewhat of that model isn't it?
I've never paid anything to read /. ... and i'm a frequent user :)
There are three parties to a micropayment transaction:
- The party receiving the money.
- The bank, credit card company, or other intermediate party facilitating the transaction.
- The party paying the money.
The way it works is relatively simple. Party 3 does something which requires a micropayment. This could be $1.00, $0.10, or $0.001. Either way, the procedure is the same:When the transaction takes place, a record goes into a database on Party 1's side, showing that a certain amount is expected to be collected. Party 1 would only have to keep track of the total amount it expects to collect from each Party 2 it uses to facilitate transactions. Therefore, it would not take tremendous resources on Party 1's part to keep track of an enormous number of tiny transactions. If Party 1 uses 4 different Party 2 providers, it would only have to keep track of those 4 numbers. Party 1 could elect to keep track of each individual transaction for real-time management purposes, but this would take tremendous resources and expenses.
Two records go into a database on Party 2's side. The first shows that an amount is being collected from a certain Party 3. The second shows that an amount is being paid to a certain Party 1. Because Party 2 facilitates the transaction, it does business with many Party 1's and many Party 3's, so each of these two records would point to the other for reporting purposes. Party 2 would need an enormous storage system and enterprise class databases to keep track of this information. Also, the database would need to organize the information hierarchically so that Party 1 or Party 3 could log in and see a list of all transactions they are paying or receiving, and to/from whom. Party 1 and Party 3 would need to trust Party 2, but micropayments are small, so the risk of error is in the 10's of dollars.
Party 3 could receive an electronic statement of total amounts paid to each Party 1 with whom Party 3 did business. This would probably cost extra, so Party 3 could elect to receive a cumulative total for all transactions less than a certain amount, say, $0.10, and individual records for all transactions above that value.
Finally, here are the mechanics of the micropayments: Party 3 sets up a maximum amount of micropayments being made in any period of time before a special notification occurs to authorize additional micropayments. Suppose this amount is $30.00 in any 30 day period. Immediately, Party 2 would receive the $30.00 through an electronic transfer from Party 3's bank account or credit card. These $30.00 go into a huge pot of all money Party 2 is holding on deposit from all Party 3's. As time goes by, Party 3 does things that cause transactions to take place. Party 2 knows the total amount it, Party 2, not Party 3, owes to each Party 1, and the total amount still on deposit by each Party 3. These two values are kept track of separately. When the amount owed to a Party 1 exceeds a certain value, say, $100.00, or whatever Party 2 decides based on the level of service Party 1 elects, that amount is electronically transferred from Party 2's big pot to Party 1's bank account. When a micropayment transaction takes place, essentially only two things happen: A numeric value is incremented in each Party 1's account, and decremented in each Party 3's account.
Party 3 does not pay anything for these services. Party 1 may or may not pay depending on the terms of its agreement with Party 2. Party 2 makes a profit by earning interest on the $30.00 that it is holding in advance, and the $100.00 that it does not pay until that amount is reached.
- buying music online
- paying to play video games
Both of those seem pretty reasonable to me. I have a bunch of Chucky Cheese coins sitting on a shelf -- it's a pretty inefficient system. And think about all those parents who would rather give their kids a legal way to buy online music, rather than having them download illegal MP3s (and fill the family computer with adware); actually iTunes already offers something like this.Find free books.
> How in the world is that patentable? Apple has been doing that with iTunes since the beginning.
The point is that you can lump together 10 transactions from 10 *different* merchants. That is far from trivial.
A system similar to this is already operation in six countries. It is called Fundamo, and was originally developed for mobile payments across the GSM network. The architecture, and an implementation, developed by Fundamo are licensed to network operators who partner with banks to offer this service on their networks. The company was founded in 1999 in South Africa, is backed by two of the biggest financial institutes on the continent, and has numerous patents to its name. Its system will be rolled out in another six countries this year, under various brand names. See www.fundamo.com.
MasterCard only provides the network. The banks are the ones who "absorb the cost" and they do that by billing the merchant for most types of orders (on the net) and increased fees for consumers for other types of fraud. MasterCard takes something like .08% of the transaction value for their charge of doing the transaction. The banks on the other hand take 1.5% to 3.5% for normal clients plus $.20 per transaction charge plus your monthy fees.
The reason micropayments won't work is that transactions of any type costs real money. When you start having to audit the transactions, you can't do them for less than about $.06 each unless you do millions or are willing to absorb the costs of lost transactions. Are you willing to pay the transaction house $.10 on your $.05 page view? I don't think so and by the time it gets to be real money, Visa and MasterCard are already playing in that space.
So why should anyone expect a person owning a PC to pay for each play of a video game. We optimized that out long ago.
You're trolling, right? Fine. I'll take the "informative" karma.
Perhaps the parent should have said "arcade game". From the article: One early customer is Incredible Technologies Inc., a manufacturer of coin-operated video games like the Golden Tee golf game. It has selected Peppercoin 2.0 to process credit card transactions in its future lineup of games, which will be able to take credit card swipes.
HAND!