Micropayments
Some folks are talking about micropayments again, and some micropayment companies such as PepperCoin are gearing up for full battle. In a recent article, PepperCoin announced that they are going to allow people to use their credit cards to carry out tiny ($0.20 - $0.25) transactions.
Clay Shirky wrote a good article on why micropayments won’t work. In large part I think his argument is a usability argument. “The mental transaction cost is too high.” That is, it just isn’t worth the effort to pay, and you can probably find what you want some other place for free.
Maybe yes, and maybe no. Clay’s article is good, but I do feel that there is some wiggle room. For compelling content or for unique applications (e.g., games), micropayments could make sense. I’d pay $0.25 for some things, but not much more, especially if I was getting something unknown (e.g., a game without a free preview).
Visa, Mastercard and American Express are not in the micropayments game. WHY? Can someone explain this to me? isn’t this a very clear business opportunity for them?
June 28th, 2004 at 11:21 am
I imagine the credit cards you mentioned aren’t in the micropayments game because it’s too big of a risk right now. Are people screaming for micropayments? No. Can credit cards make a lot of money from it? No. (What’s the late payment on $2.00 worth of micropayments?) For now, I think it’s smart of them to stick to their core brand of giving people credit for big purchases, not micro ones.
June 28th, 2004 at 4:24 pm
All the card companies have been in this space before….electronic cash, VisaCash and Mondex (from MasterCard) ….there is no business case for the payment schemes to push.
The banks don’t want it…as they would be the ones that would have to sell and manage the system.
Also, if I can pay 0.99 for a song on iTunes with my credit card, the leap to 0.25 is not that big. Give me something compelling and I would be all over it.
June 28th, 2004 at 5:17 pm
Why don’t credit card companies support micropayments? Their return on the transaction is minimal. Cost to process a transaction is roughly the same at $25.00, $250.00, or $0.25. Revenue to the credit card company is usually a percent or two, so at sub $1.00 amounts it’s not very interesting for them. They would want/need too big a cut of the action.