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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...
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.
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.