There is a common saying on the Internet: “Information wants to be free”. The problem is information is not free. Information is ultimately produced by people, either indirectly or directly, and most people need money to live.
People are used to paying for physical products such as books, magazines, and videos. This is because it is expensive to create and distribute physical books, magazines and videos. Distribution of content through Internet is virtually free in comparison, but there is still a cost. Web servers, streaming servers, robust hosting environments, servers, and fast Internet connections all cost money, and there is of course still the cost of creating the information the first time.
Consequently it does not make sense to distribute information services for free someone has to pay. It does not either make sense to charge large amounts of money for information services, since the distribution costs are significantly lower than for corresponding physical distribution.
Physical information products are often distributed in chunks. Magazines and newspapers, for example, usually contain a large number of articles. On the Internet, however, a user might only want to download one single article.
There is obviously a need for some way to accept small payments online. There should be some way to pay €0.01 to view a single magazine article, or pay €1 to buy a better set of hockey clubs in an online hockey game.
These types of small payments are known as micropayments. There is no exact definition of how small a payment must be to be considered a micropayment, so in this report I will place the threshold at €1.
There are literally hundreds of online payment systems available such as PayPal, ClickMiles, Cybergold, Cybermoola, E-gold, FirstLook, FreeRide, GiantRewards, iWon, Memolinks, Millicent, Mint, MyPoints, PointClick, TargetShop, Visa, and many more. Some require you to pre-deposit money in an account, some identify you via your cellular phone, some are virtual currencies that only work online, some work like electronic checks, and some provide the electronic equivalence of cash in your pocket. Most Internet users have not heard of more than two or three of these, if any.
Very few payment solutions have succeeded in any global scale, especially when it comes to handling of micropayments. Why is this? Why have certain payment solutions become widely established while others have faded away? This report attempts to find out what it takes to make a micropayment system succeed.
Contents
Chapter 1
Preface
1.1 Background
1.2 Intended audience
1.3 Acknowledgements
Chapter 2
Introduction
Chapter 3
Purpose of this report
Chapter 4
Scope and methodology
Chapter 5
What is a payment system?
5.1What is money?
5.2Forms of money
5.3Characteristics of a payment system
Chapter 6
What is a micropayment system
Chapter 7
What could micropayments be used for?
Chapter 8
How is success defined?
Chapter 9
Existing payment solutions
9.1 Electronic check
9.2 Buyer-initiated bank transfer
9.3 Merchant-initiated bank transfer
9.4 Prepaid merchant account
9.5 Prepaid merchant voucher
9.6 Invoice
9.7 Payment relationship sharing
9.8 Physical cash
9.9 Electronic cash
9.10 Mixed payment solutions
Chapter 10
Analysis
10.1 Success stories
10.2 Failure stories
Chapter 11
Conclusion
Appendix A Interviews
Appendix B List of payment solutions
Index
References
Download
PDF Ebook What Makes a Micropayment Solution Succeed
