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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.
Still amazing that in 2005 nobody has figured out a way to make it simple to charge a penny on-line.
The cost is in the partnering. Even if you can get the user to put in money in large blocks that don't kill you in financial transaction fees ($20+ is my guess) instead of being charged a few cents a day/week, you have the transaction overhead of whatever unique system each site uses (per page, per article, per section, per day, any of these with caps...), subtracting the fees from each user, aggregating the total payment to each site and providing statements to all.
The key to the micropayment game is aggregation of volume . If your company is processing 2000 payments per day of $0.01 each from 2000 different people, it's probably costing you more than it's worth. However, if you're processing five million payments a week with an average individual's cost being around $0.25, you might be breaking even. If you could get two dozen major sites and hundreds of smaller ones on board, you might make money.
Either the financial costs (actually taking and distributing money) need to be reduced, or the number of transactions per person/site need to go way up. I don't see banks and credit card companies giving out money for cheaper, so, here's the hard question: How do you get widespread buy-in on a system that only works once it has widespread buy-in? Who's the philanthropist who will fund a losing game for as long as it takes to become profitable?
Hey, maybe the government is interested! They own the money, anyway...
That what was all this school was for... to teach us how to solve our own problems. -- janeowit
The new fees will enable merchants to process payments at a rate of 5 percent plus 5 cents per transaction.
So for $0.99 it will still take a 10% fee.
Bastards.
Screw Paypal. Seriously. I've quit dealing with anybody only accepting Paypal as payment methods, I've voiced my dissent (in a calm fashion) over their continued poor service and especially after the recent charity "issues", I'd urge other people to do the same.
BitPass has had micropayments for some time... the catch is you have to buy at least $3 credits, but then you can pay those anonymously to websites in increments as small as one cent.
In related news:
Slashdot to introduce microposts, the offers seems geared toward the anonymous cowards posting under the 2 lines area...
Paypal just siezed $27,000 of aid going to the Red Cross from SomethingAwful.com users - I'd say thats reason enough to cancel if you haven't already been royally screwed by them...
God forbid ... 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.
It's not entirely clear what you mean, but I'm assuming you're refering to a company like PayPal "getting a piece of the pie" by facilitating those transactions of a buck or two. What's your notion, instead? That the musicians re-invent micropayments themselves, establish the infrastructure, the banking connections, etc., thus cutting out "the man," and then having no time to ever write or record another lick of music?
We're a civilization of specialists. Most musicians don't grow all of their own food, either, and instead allow other people to get a "piece" of their food money. Someone else gets a piece of the pie when the band replaces the brake pads on their van, too. Making it easier for artists to handle small transactions is making it better for the artists, but it isn't better for anyone if the people building systems like that have no expectation of making a living off of their own efforts and investments themselves.
Certainly artists that don't find this sort of tool useful can just... not use it! If tip jars at bars and coffee houses are more their speed, then that's always an option, too.
Don't disappoint your bird dog. Go to the range.
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.