Last week, I read a newsletter on payment systems for freelancers & individual contributors. It spoke about how micropayments, digital wallets & cryptocurrencies were becoming a means to make small payments especially for content solutions.
Just a few years ago, it was rare to find micropayment systems or e-wallets to make cashless transactions for Online content like a blog post, a news article, even a painting or some service. Now even a small tea-vendor in a remote town somewhere on the map has multiple means to make & receive small payments.
Let us take you through what are micropayments, & how they are here to stay.
What is a micropayment
To put it simply, micropayments are transactions of small amounts of money done Online. Ideally, cashless digital transactions under $20 are deemed so, but the lines are really blurred as we often use it to pay friends or small vendors various sums for services rendered.
Even as IT pioneer Ted Nelson first used it in the 1960s, microtransactions were popularized in the late 90s, then used to charge visitors for access to Content or for digital downloads. While the 1st-generation micropayments didn’t really take off, today micropayments are widely used to transact for online games, social networks, mobile applications, dating sites, & other digital services.
Types of micropayments
With the advances in technology, ease of payment is a real thing. No longer do you have to bring out cash for small amounts because your debit or credit card will not support making small payments. Micropayment platforms built for handling small transactions work in several ways:
- Prepay or Subscription Model: This model has users pay in advance to use a specific service – reading articles Online, for example. It allows access specific amount of usage or period of time to social media Sites, Online games, etc & the payment is required to be upfront.
- Post-pay Model: This model, as the title suggests, aggregates various microtransactions & charges a combined amount after the usage of services. However, this model is hardly used since most businesses prefer to collect the payment first.
- Pay-as-you-go Model: This type of micropayment involves making a payment as every transaction happens. This best example of this model is Online gaming, where you pay every time you want to extend your lives or buy boosters to aid your game.
- Collaborative Model: This model best works for Online publishers. Many small publishers or news Websites may not have enough readership to support a micropayment system on its own. However, this model, also called the Associated Model involves connecting different sites together & users getting a bouquet of sources to read through.
Micropayments can be used for:
- Media: One can use micropayments to read specific Content instead of paying for the whole newspaper. It can also be used to view videos, download music or to receive payments for freelance contributions.
- Messaging: Micropayments are used for messaging where businesses are charged a cent or less to send bulk messages in a bit to avoid spamming. Individual users too, pay a tiny amount for sending messages, which is actually folded into the cost of mobile services.
- Online gaming / Virtual items: Users often pay less than $1 to restore lives or use boosters to move ahead in their favorite games. In other cases, users will prefer to pay a small amount to have ad-free apps or use certain paid features of the app.
- Software services: Similar to Online gaming, users can pay a small amount to avail of certain required services of a software or pay the customer service for a specific task outside of the free services available.
- Charity: People can make small donations to their preferred charity or cause periodically or even set a recurring charge a few times a year.
- Social Media: Social Media (Facebook, Google, Linkedin, etc.) enthusiasts can pay small amounts to avail of in-media services like promote businesses or get better visibility while job hunting.
However, these do need improved solutions since in-app micropayments are very basic. Social media giants are already working on building separate micropayment platforms – for example, Google is building a platform based on Google Checkout & Facebook is launching (with partners like Visa, Mastercard) a new crypto-currency called Libra in 2020.
Providers offering micropayment services
Most micropayment platforms have a flexible system. In a nutshell, a merchant ties up with a 3rd-party micropayment service provider for easier payment directly through the digital wallet maintained by the vendor.
Here are a few popular micropayment platforms:
- PayPal MicroPayments: Designed for PayPal Business or PayPal Premier customers who typically process transactions under (but not limited to) $12 the system is available to all merchants & in all countries where Business accounts are available.
- Flattr: A Swedish-based microdonation subscription service, Flattr enables its subscribers to pay monthly patronage to help fund their preferred Websites & creators.
- Jamatto: Jamatto is a micro-subscriptions platform that allows Websites & publishers to accept payments as small as 1c & consumers the ability to make hassle-free small payments. It is used by publishers & newspapers across America & Europe.
- M-Coin: Developed by Portuguese multinational Timwe Tech, M-Coin is a carrier billing service that can be used for buying digital Content on websites or mobile phones. The user’s phone bill is then charged by the mobile network operator.
- Blendle: Blendle is a Dutch Online news platform that aggregates articles from several newspapers & magazines & offers users access to articles, which can be purchased individually. While entire issues are also available for purchase, the pay-per-article model is popular as readers have the liberty to choose.
- SatoshiPay: UK-based SatoshiPay is a micropayment platform that enables digital transactions on a micro-scale. The platform allows its users & companies to trade digital goods in very small amounts. It has different plug-ins for features you want to use including 1-click content paywall to avoid going through several pages to make payments, ad-block paywall, & frictionless donations.
- Zlick: Estonia-based start-up Zlick enables consumers to pay a few cents for their favorite readings & videos online by just pressing a button once. With Zlick, users can also pay for online classifieds & small donations.
- Fortumo: Another carrier billing service, Fortumo is a digital enabling platform for app stores. The company connects service providers with more than 350 mobile operators across Asia, Europe, Latin America, the Middle East, & Africa. Service providers use Fortumo’s platform to manage the end-to-end customer lifecycle of mobile users on these networks through the company’s bundling, carrier billing, & messaging solutions.
Digital Wallets
Digital wallets or e-wallets as they are popularly known, come in handy to those users who are hesitant to share their banking info with Websites or mobile applications while making small purchases. While you can link it with your bank account to make payments, e-wallets can also be used by adding a certain amount to your account without having to give away your bank details.
Here are a few:
- Wallet One: A convenient multi-currency e-wallet, Wallet One allows users to pay for goods & services, top-up & withdraw funds around the world in local currencies. The Wallet One Checkout, a separate feature is also a payment system aggregator for online stores.
- Venmo: Owned by PayPal, Venmo allows you to make & share payments with friends for rent, utilities, dinner, drinks, movies, etc. However, it is available only in the United States.
- Due: Apart from a digital wallet, Due offers ePayment, eBank, & payment processing capabilities. Invoicing, time tracking, project management, & client management tools are also available for freelancers, small business owners & start-ups.
Additionally, all major mobile companies have built-in digital payment platforms. ApplePay, Samsung Pay, AndroidPay, Google Pay are only a few examples of how cashless transactions are as easy as they sound.
Advantages & Disadvantages of micropayments
As with any payment system, microtransactions, too have their set of pros & cons. Here are a few:
Pros
- Transactions can be conducted Online without having to give out all your bank details. A finicky user can maintain a degree of anonymity.
- Easy, quick & convenient purchase of real items & virtual services. Literally at the click of a button.
- Fewer Online transfers of actual payment reduce the opportunities for theft or abuse.
Cons
- The account holder is left vulnerable if sensitive account information is compromised.
- A thorough vetting of the vendor is an absolute necessity. One always runs a risk of losing money in case the vendor is dishonest.
- Single purchases may cost more than a combined larger purchase.
To sum up, micropayment is a very convenient means to secure your daily transactions. It is quick, simple & easy. It can stay secure if you are a little careful with your devices & accounts & follow standard security protocols (change of password regularly, etc). With more advances in ease of access & usability, more people will only hop on to the bandwagon. The technology is surely evolving!
Image by Ahmad Ardity from Pixabay