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, 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. One problem that has prevented the emergence of micropayment systems is a need to keep costs for individual transactions low, which is impractical when transacting such small sums even if the transaction fee is just a few cents.
There are a number of different definitions of what constitutes a micropayment. PayPal defines a micropayment as a transaction of less than £5 while Visa defines it as a transaction under 20 Australian dollars.[verification needed]
Micropayments were initially devised[by whom?] as a way of allowing the sale of online content and as a way to pay for very low cost network services. They were envisioned to involve small fractions of a cent, as little as US$0.0001 to a few cents. Micropayments would enable people to sell content on the Internet and would be an alternative to advertising revenue.
During the late 1990s, there was a movement to create microtransaction standards, 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. The W3C has since stopped its efforts in this area, 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, 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, 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".
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. Debuting in 1999, its service was never widely adopted.
Millicent, originally a project of Digital Equipment Corporation, was a micropayment system that was to support transactions from as small as 1/10 of a cent up to $5.00. It grew out of The Millicent Protocol for Inexpensive Electronic Commerce, which was presented at the 1995 World Wide Web Conference in Boston, but the project became associated with Compaq after that company purchased Digital Equipment Corporation. The payment system employed symmetric cryptography.
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. It featured pre-paid accounts from which micropayment charges could be drawn. NetBill was initially absorbed by CyberCash in 1997 and ultimately taken over by PayPal.
The term micropayment or microtransaction is sometimes used 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 micropayment systems
Current systems either allow many micropayments but charge the user's phone bill one lump sum or use funded wallets.
Flattr is a micropayment system (more specifically, a microdonation system) which launched in August, 2010. Actual bank transactions and overhead costs are involved only on funds withdrawn from the recipient's accounts.
ChangeTip is a micropayments platform, which launched in 2013. The company believes that 'likes' and 'shares' do not suffice in showing true appreciation online, and thus call themselves the 'love' button for the Internet. The company builds micropayments on top of social networks, and operates over Twitter, Reddit, Facebook, Slack and more. Transactions are bitcoin-based and cost the user nothing to process.
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. As of 2013, the service is offered in select currencies only.
SatoshiPay is a micropayment processing and content payment platform based on bitcoin. 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. Transaction amounts as little as US$0.01 or less, which the company calls "nanopayments", are enabled by the use of smart contracts.
- "In Online World, Pocket Change Is Not Easily Spent". The New York Times. 27 August 2007.
- "Micropayments Overview". w3c.com.
- "Toward a Click-and-Pay Standard". wired.com. 11 March 1999.
- "Get Paid Small Amounts Online with Micropayments". www.paypal.com. Retrieved 2015-07-12.
- "Visa launches new way to pay online". payclick.com.au. 24 June 2010. Archived from the original on 2011-07-06.
- Hardy, Norm; Tribble, Dean (1993). "The Digital Silk Road". CiteSeerX: 10
.1 .1 .53 .6972.
- Theerasak Thanasankit (2003). E-commerce and Cultural Values.
- "Common Markup for micropayment per-fee-links 1.1 Origin and Goals". W3C Working Draft. 25 August 1999.
- "Archives of IBM Micro Payment sites". archive.org.
- "IBM Micro Payments". Archived from the original on 2000-08-30.
- Johnson, Amy Hellen. "iPIN". ComputerWorld.com. ComputerWorld. Retrieved 4 January 2012.
- "Compaq to license digital cash technology". cnet.com. December 23, 1998.
- "Millicent". Archived from the original on 1997-06-01.
- "What's New". Millicent. June 1997. Archived from the original on 1997-07-07.
- "2.6.10 Micro Payments (micropay) bof Current Meeting Report". ietf.org. Internet Engineering Task Force. November 8, 1999.
- "The NetBill Project". Archived from the original on 1997-06-13.
- "About NetBill". Archived from the original on 2002-10-09.
- "CyberCash press release". archive.org. Retrieved Jan 12, 2015.
- O'Hear, Steve (August 12, 2010). "Flattr opens to the public, now anybody can ‘Like’ a site with real money". TechCrunch Europe. Retrieved August 13, 2010.
- "MCoin Product Lines - Mobile Marketing magazine". Mobile Marketing Magazine. 2011-06-30. Retrieved 2011-07-02.
- Rao, Leena (October 26, 2010). "PayPal Unveils Micropayments For Digital Goods, Facebook Signs Up". techcrunch.com. AOL. Retrieved November 23, 2012.
- "Micropayments". PayPal Integration Center. PayPal. Retrieved November 23, 2012.
- McMahan, Ty (July 7, 2011). "EBay’s Zong Deal: Mobile Payments Are All Fun & Games". WSJ Blogs: Venture Capital Dispatch.
- Grundy, Chris (6 September 2015). "Why the Future of Bitcoin Lies in Europe". CoinDesk. Retrieved 2015-11-23.
- W3C Micropayment Working Group
- Parhonyi, Robert. "Second generation micropayment systems: lessons learned" (PDF).