Micropayment

A micropayment is a financial transaction involving a very small sum of money and usually one that occurs online. A number of micropayment systems were proposed and developed in the mid-to-late 1990s, all of which were ultimately unsuccessful. A second generation of micropayment systems emerged in the 2010s.

While micropayments were originally envisioned to involve very small sums of money, practical systems to allow transactions of less than 1 USD have seen little success.[1] One problem that has prevented the emergence of micropayment systems is a need to keep costs for individual transactions low,[2] which is impractical when transacting such small sums[3] even if the transaction fee is just a few cents.

Definition

There are a number of different definitions of what constitutes a micropayment. PayPal defines a micropayment as a transaction of less than £5[4] while Visa defines it as a transaction under 20 Australian dollars.[5]

History

The term was coined by Ted Nelson[6], long before the invention of the World Wide Web. Initially this was conceived as a way to pay the various copyright holders of a compound work[7]. Micropayments, on the Web, were initially devised as a way of allowing the sale of online content and as a way to pay for very low cost network services.[8] They were envisioned to involve small fractions of a cent, as little as US$0.0001[9] to a few cents.[3] Micropayments would enable people to sell content on the Internet[3] and would be an alternative to advertising revenue.[10] During the late 1990s, there was a movement to create microtransaction standards,[3] and the World Wide Web Consortium (W3C) worked on incorporating micropayments into HTML even going as far as to suggest the embedding of payment-request information in HTTP error codes.[2] The W3C has since stopped its efforts in this area,[2] and micropayments have not become a widely used method of selling content over the Internet.

Early research and systems

In the late 1990s, established companies like IBM and Compaq had microtransaction divisions,[3] and research on micropayments and micropayment standards was performed at Carnegie Mellon and by the World Wide Web Consortium.

IBM Micro Payments

IBM's Micro Payments was established c. 1999,[11] and were it to have become operational would have "allowed vendors and merchants to sell content, information, and services over the Internet for amounts as low as one cent".[12]

iPIN

An early attempt at making micropayments work, iPIN was a 1998 venture-capital-funded startup that provided services that allowed purchasers to add incremental micropayment charges to their existing bill for Internet services.[13] Debuting in 1999, its service was never widely adopted.[13]

Millicent

Millicent, originally a project of Digital Equipment Corporation,[14] was a micropayment system that was to support transactions from as small as 1/10 of a cent up to $5.00.[15] It grew out of The Millicent Protocol for Inexpensive Electronic Commerce, which was presented at the 1995 World Wide Web Conference in Boston,[16] but the project became associated with Compaq after that company purchased Digital Equipment Corporation.[14] The payment system employed symmetric cryptography.[17]

NetBill

The NetBill electronic commerce project at Carnegie Mellon university researched distributed transaction processing systems and developed protocols and software to support payment for goods and services over the Internet.[18] It featured pre-paid accounts from which micropayment charges could be drawn.[19] NetBill was initially absorbed by CyberCash in 1997 and ultimately taken over by PayPal.[20]

Online gaming

The term micropayment or microtransaction is sometimes attributed to the sale of virtual goods in online games, most commonly involving an in-game currency or service bought with real world money and only available within the online game.

Recent systems

Current systems either allow many micropayments but charge the user's phone bill one lump sum or use funded wallets.

Flattr

Flattr is a micropayment system (more specifically, a microdonation system) which launched in August 2010.[21] Actual bank transactions and overhead costs are involved only on funds withdrawn from the recipient's accounts.

GNU Taler

GNU Taler is an electronic payment system developed in the public at Inria, France. It largely functions like digital cash with an electronic wallet. The system is based on blind signature and provides cryptographic proofs of payment. It is said to become operational in 2018.[22]

Jamatto

Jamatto is a micropayments and microsubscriptions system that allows websites and publishers to accept payments as small as 1c by modifying just their HTML source code [23] Jamatto is in use by newspapers across three continents.

M-Coin

A service provided by TIMWE, M-Coin allows users to make micropayments on the Internet. The user's phone bill is then charged by the mobile network operator.[24]

PayPal

PayPal MicroPayments is a micropayment system that charges payments to user's PayPal account and allows transactions of less than US$12 to take place.[25] As of 2013, the service is offered in selected currencies only.[26]

SatoshiPay

SatoshiPay is a micropayment processing platform for online media.[27] The service allows websites to monetize content through single-click or automatic payments and removes friction associated with existing paywall solutions by operating without signup or software download for the end user.[28] Transaction amounts down to less than US$0.01, which the company calls "nanopayments", are enabled by the use of smart contracts and blockchain technology based on the Stellar network.[29]

Swish

Swish is a payment system between bank accounts in Sweden. It is designed for small instant transactions between people, instead of using cash (cash has largely dropped in use in Sweden since 2010), but is also used by small businesses such as sports clubs that don't want to deal with the cost of a credit card reader. A cell phone number is used as a unique user identifier, and must have been registered at a Swedish bank. A smartphone app is used to send money, but any cell phone can be used as a receiver. The lowest permitted payment is 1 SEK (around €0.11) and the highest is 10,000 (around €1,100), although 150,000 SEK can be transferred if the transaction is preregistered in the internet bank. The fee is generally zero for private people, but when the recever is a organisation e.g. sports club or company, there is fee of 2 SEK, which is considered significant if a sports club sells coffee and cookies at an event. Swish has become popular, with 50 % of the Swedish population registered as users in 2016.

Similar apps with zero fee for small instant private transactions, Vipps and MobilePay have become popular in Norway and Denmark.

Obsolete systems

Zong

Zong mobile payments was a micropayment system that charged payments to users' mobile phone bills. The company was acquired by eBay and integrated with PayPal in 2011.[30]

References

  1. ↑ "In Online World, Pocket Change Is Not Easily Spent". The New York Times. 27 August 2007.
  2. 1 2 3 "Micropayments Overview". w3c.com.
  3. 1 2 3 4 5 "Toward a Click-and-Pay Standard". wired.com. 11 March 1999.
  4. ↑ "Get Paid Small Amounts Online with Micropayments". www.paypal.com. Retrieved 2015-07-12.
  5. ↑ "Visa launches new way to pay online". payclick.com.au. 24 June 2010. Archived from the original on 6 July 2011.
  6. ↑ "The Babbage of the web". Retrieved 13 November 2017.
  7. ↑ Nelson, Ted. "A THOUGHT FOR YOUR PENNIES: MICROPAYMENT AND THE LIBERATION OF CONTENT". Retrieved 13 November 2017.
  8. ↑ Hardy, Norm; Tribble, Dean (1993). "The Digital Silk Road". CiteSeerX 10.1.1.53.6972.
  9. ↑ Theerasak Thanasankit (2003). E-commerce and Cultural Values.
  10. ↑ "Common Markup for micropayment per-fee-links 1.1 Origin and Goals". W3C Working Draft. 25 August 1999.
  11. ↑ "Archives of IBM Micro Payment sites". archive.org. Archived from the original on 3 February 1999.
  12. ↑ "IBM Micro Payments". Archived from the original on 30 August 2000.
  13. 1 2 Johnson, Amy Hellen. "iPIN". ComputerWorld.com. ComputerWorld. Retrieved 4 January 2012.
  14. 1 2 "Compaq to license digital cash technology". cnet.com. 23 December 1998.
  15. ↑ "Millicent". Archived from the original on 1 June 1997.
  16. ↑ "What's New". Millicent. June 1997. Archived from the original on 7 July 1997.
  17. ↑ "2.6.10 Micro Payments (micropay) bof Current Meeting Report". ietf.org. Internet Engineering Task Force. 8 November 1999.
  18. ↑ "The NetBill Project". Archived from the original on 13 June 1997.
  19. ↑ "About NetBill". Archived from the original on 9 October 2002.
  20. ↑ "CyberCash press release". archive.org. Archived from the original on 11 June 1997. Retrieved 12 January 2015.
  21. ↑ O'Hear, Steve (12 August 2010). "Flattr opens to the public, now anybody can 'Like' a site with real money". TechCrunch Europe. Retrieved 13 August 2010.
  22. ↑ "GNU Taler". taler.net. Retrieved 2017-06-14.
  23. ↑ "Jamatto Micropayments". jamatto.com. Retrieved 2017-12-01.
  24. ↑ "MCoin Product Lines - Mobile Marketing magazine". Mobile Marketing Magazine. 30 June 2011. Archived from the original on 24 July 2011. Retrieved 2011-07-02.
  25. ↑ Rao, Leena (26 October 2010). "PayPal Unveils Micropayments For Digital Goods, Facebook Signs Up". techcrunch.com. AOL. Retrieved 23 November 2012.
  26. ↑ "Micropayments". PayPal Integration Center. PayPal. Retrieved 23 November 2012.
  27. ↑ Degeler, Andrii (25 February 2016). "The future of media monetization: Cryptocurrencies and micropayments". The Next Web. Retrieved 2016-05-24.
  28. ↑ Grundy, Chris (6 September 2015). "Why the Future of Bitcoin Lies in Europe". CoinDesk. Retrieved 2015-11-23.
  29. ↑ "SatoshiPay partners with Stellar.org". SatoshiPay. 12 November 2017. Retrieved 2018-07-31.
  30. ↑ McMahan, Ty (7 July 2011). "EBay's Zong Deal: Mobile Payments Are All Fun & Games". WSJ Blogs: Venture Capital Dispatch.
  • W3C Micropayment Working Group
  • Parhonyi, Robert. "Second generation micropayment systems: lessons learned" (PDF).
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