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PayPal to Offer Micropayments
lazarus corporation writes "According to a press release on shareholder.com, PayPal are introducing micropayments processing fees for digital goods. Will this allow musicians to do away with record companies completely and successfully sell their own music online?" It looks geared to be the under $2 area and not the couple of pennies area, so I think calling it "Micropayments" is a bit much, but it's something. Still amazing that in 2005 nobody has figured out a way to make it simple to charge a penny on-line.
Why would you need to pay someone only 1 or 2 pence/cents? I can't think of anything this cheap that you would need to buy on the internet. Except perhaps a license to play a music track once or something...
....that the artists themselves would have the ability to sell and market their own music without big companies trying to get their piece of the pie. I am all for anything that returns music to an art-form rather than a business model.
xao
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But this is the beauty of pay pal. When paypal transfer money from one account to another the money is still just sitting in Pay Pal's account. So users Put in $20 for micropayments, it gets moved to 20 different accounts, and each of those accounts gets 20 micropayments. Apart from raw database management costs which are minimal, this is going to cost Pay Pal the same.
The core challenge for small micropayments is the high cost of dealing with disputes. The cost to the company of a single dispute can be $5 to $50 depending on how much communication and labor is required to resolve a disputed transaction. If the transaction service is only charging a penny, then it only takes disputed charges in 1 in 5000 to 1 in 500 transactions to totally consume all the revenues - leaving no money for the actual service (software, hardware, marketing, etc.) in the other 99.9% of the transactions. Even if the cost of the technology were zero, these "real people" costs would make micropayments prohibitive.
Paypal tries to avoid these high cost by making it very hard to contact a "real" person. Real people just cost too much. Of course, Paypal's alleged reputation for poor customer service (see paypalsucks.com) is the side effect of trying to keep costs down to enable low-dollar transactions.
Perhaps when someone creates a competent AI for customer service, micropayments could work. Given that most companies still have trouble getting competent people for customer service, I'm not hopeful.
Two wrongs don't make a right, but three lefts do.
Not a bad deal for PayPal, but not a good deal for anyone else.
We call it art because we have names for the things we understand.
Paypal scares me now. Too many people depent on it as their sole way to receive payments. I mean, as long as they're the ones getting jacked with the high fees, that's fine with me.
The thing about Paypal is that its buyer protection is rediculous. I've recently sold something to a guy in Europe and sent it with USPS. A few weeks later he disputes saying that he never received the item. Then I look at his eBay feedback and realize that I just got screwed. There is nothing I can do. So now I have to refuse selling to people outside of North America or I have to charge them $50+ for UPS or FedEx.
It seems like after eBay takes their cut and Paypal takes their cut, the seller is left with a sore behind.
Not only that, but they typically measure the amount of gasoline that you bought down to the thousandth of a gallon -- The "true" price of whatever you pumped should then be specified down to the millionth of a dollar, or ten-thousandth of a penny.
To avoid rounding issues, if they're going to specify the price down to 1/1000 of a dollar, they'd have to have pumps with a granularity of ten gallons.
Suppose you required along with your email that people first deposited a .001 cent micropayment to your email provider, or else their email would be bounced. This cash would be deposited in your "email account", and you could use it to send .001 cents to other people. So, if you emailed back and forth between two friends, your net loss would be zero (B sends .001 to person A, person A sends .001 back to B).
.001 cents for every email, and they send out hundreds of thousands of day, that's 100s of dollars wasted on micropayments. Up the micropayment to .01 cent, and the mass emails to a million a day (not unheard of), and you're dealing with tens of thousands of dollars in spam overhead. That's a lot, and not easy to recoup by selling product. It makes spamming unfeasible.
Now consider spam. If spammers had to pay
The idea is a little like putting re-usable postage stamps on your email. Instead of paying a tax, you're paying an assurity that you've enclosed a totally insignificant monetary sum along with your email.
People would probably be able to whitelist certain accounts, so that they could recieve mass mails from the University, and from Sport Teams, and from their family. But ideally, it wouldn't matter, becuase the payments would be so small, it would only affect those doing craaaaazy amounts of mass mailing.
Hm... when it comes to when micropayments online - say a penny per transaction - should I welcome or fear this development?
How many free services/sites will start charging cash to use their services (a penny per page view) that will seem cheap at first view (it's only a penny!) but will start nibbling away at your wallet over time.
Just a stray thought.
Why on earth did you drop moneybookers? It didn't exactly cost you very much to publish an email adress did it? Ten dollars may not be very much, but what's the point of refusing them?
The ONLY kind of online payment system I have used (short of credit cards over SSL) is moneybookers, and I won't use anything else for that scale of payments unless they go out of business.
xkcd is not in the sudoers file. This incident will be reported.
(Score:0, Redundant)
It wasn't fscking redundant when I posted it moderators.
And the question still stands - what good is adding another service to PayPal when they can't even get their existing services, dispute system, and watchdog stuff to work right?
"Bah!" - Dogbert
Ron Rivest and Silvio Micali have looked closely at micropayments, and are even involved with a startup named Peppercoin.
It's been a while since I heard Professor Rivest (of RSA fame) speak, but part of his solution was to aggregate payments across customers. In his talk he explained how buyers could be given electronic money, only a fraction of which was actually valuable to a particular vendor. Suppose 9 out of 10 "e-dimes" would not be redeemed, but the 10th entitled the vendor to a dollar from the credit card company. The vendor would break even on average, but if they could test the money themselves, would use far fewer transactions.
Making the whole system secure relies on a bunch of cryptography. Specifically, it's important to not be able to forge money, not be able to test a bunch of money to see if it's valuable to a vendor, and not be able to give the same money to multiple vendors.
I imagine the Peppercorn is currently proposing a simpler solution that integrates better with existing technology. Either way, when a payments are sufficiently large, the system could just defer to current technology, so the vendor is no worse off.
I just let users buy credits (that can be used on any site supporting my system) and let users transfer credits from that pool. When they run out then they can't access any of the using sites without buying more credits. *shrugs* Seems easy enough. Usually sites charge about $.01/Kb. Dunno if I could make the system profitable for me as the service provider though. I thought about making it so credits could be used for other stuff though and providing free store/auction sites that only work with credits. Use the micropayments to hook in a client base.
At what price learning? At what cost wisdom? The price is a man's peace of mind, and the cost is his life.