Micropayment
Encyclopedia
A micropayment is a financial transaction
involving a very small sum of money and usually one that occurs online
. PayPal
defines a micropayment as a transaction of less than 12 USD while Visa prefers transactions under 20 Australian dollar
s, and though micropayments were originally envisioned to involve much smaller sums of money, practical systems to allow transactions of less than 1 USD have seen little success.
One problem that has prevented their emergence 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.
and were envisioned to involve small sums of only a few cents. These transactions 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.
and Compaq
had microtransaction divisions, and research on micropayments and micropayment standard
s was performed at Carnegie Mellon and by the World Wide Web Consortium
.
, 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 became associated with Compaq
after that company purchased Digital Equipment Corporation. The payment system utilized symmetric cryptography.
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. Initiated in 1997, NetBill seems to have died completely sometime after 2005.
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".
s in online game
s like World of Warcraft
.
, an online newspaper based in Maine, launched a micropayment system in July, 2010, which uses a cell phone for payment.
is a Polynesian peer-to-peer interbank clearing network that enables micro-payments to be created and funded from local bank accounts in Australia, New Zealand, Europe or the UK; and be remitted to or from bank accounts in the South Pacific, or directly onto Mobile Phones. KlickEx users (which include by default, most mobile phone users in Polynesia/Micronesia) are connected to real time payments to or from more than 70 million bank accounts world wide.
, M-Coin allows users to make micropayments on the Internet. The users' phone bill is then charged by the mobile network operator.
, Payclick allows users to fund an account that is then drawn from when purchases at participating online retailers are made.
is a micropayment system that charges payments to users' mobile phone bills. This service can be used to purchase virtual good
s in online game
s and social network
s.
Financial transaction
A financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. It involves a change in the status of the finances of two or more businesses or individuals.-History:...
involving a very small sum of money and usually one that occurs online
ONLINE
ONLINE is a magazine for information systems first published in 1977. The publisher Online, Inc. was founded the year before. In May 2002, Information Today, Inc. acquired the assets of Online Inc....
. PayPal
PayPal
PayPal is an American-based global e-commerce business allowing payments and money transfers to be made through the Internet. Online money transfers serve as electronic alternatives to paying with traditional paper methods, such as checks and money orders....
defines a micropayment as a transaction of less than 12 USD while Visa prefers transactions under 20 Australian dollar
Australian dollar
The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu...
s, and though micropayments were originally envisioned to involve much smaller sums of money, practical systems to allow transactions of less than 1 USD have seen little success.
One problem that has prevented their emergence 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.
History
Micropayments were initially devised as a way of allowing the sale of online contentContent (media and publishing)
In media production and publishing, content is information and experiences that may provide value for an end-user/audience in specific contexts. Content may be delivered via any medium such as the internet, television, and audio CDs, as well as live events such as conferences and stage performances...
and were envisioned to involve small sums of only a few cents. These transactions would enable people to sell content on the Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
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
World Wide Web Consortium
The World Wide Web Consortium is the main international standards organization for the World Wide Web .Founded and headed by Tim Berners-Lee, the consortium is made up of member organizations which maintain full-time staff for the purpose of working together in the development of standards for the...
(W3C) worked on incorporating micropayments into HTML
HTML
HyperText Markup Language is the predominant markup language for web pages. HTML elements are the basic building-blocks of webpages....
, 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 IBMIBM
International Business Machines Corporation or IBM is an American multinational technology and consulting corporation headquartered in Armonk, New York, United States. IBM manufactures and sells computer hardware and software, and it offers infrastructure, hosting and consulting services in areas...
and Compaq
Compaq
Compaq Computer Corporation is a personal computer company founded in 1982. Once the largest supplier of personal computing systems in the world, Compaq existed as an independent corporation until 2002, when it was acquired for US$25 billion by Hewlett-Packard....
had microtransaction divisions, and research on micropayments and micropayment standard
Internet standard
In computer network engineering, an Internet Standard is a normative specification of a technology or methodology applicable to the Internet. Internet Standards are created and published by the Internet Engineering Task Force .-Overview:...
s was performed at Carnegie Mellon and by the World Wide Web Consortium
World Wide Web Consortium
The World Wide Web Consortium is the main international standards organization for the World Wide Web .Founded and headed by Tim Berners-Lee, the consortium is made up of member organizations which maintain full-time staff for the purpose of working together in the development of standards for the...
.
Millicent
Millicent, originally a project of Digital Equipment CorporationDigital Equipment Corporation
Digital Equipment Corporation was a major American company in the computer industry and a leading vendor of computer systems, software and peripherals from the 1960s to the 1990s...
, 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
World Wide Web Conference
The International World Wide Web Conference is a yearly international academic conference on the topic of the future direction of the World Wide Web...
in Boston
Boston
Boston is the capital of and largest city in Massachusetts, and is one of the oldest cities in the United States. The largest city in New England, Boston is regarded as the unofficial "Capital of New England" for its economic and cultural impact on the entire New England region. The city proper had...
, but became associated with Compaq
Compaq
Compaq Computer Corporation is a personal computer company founded in 1982. Once the largest supplier of personal computing systems in the world, Compaq existed as an independent corporation until 2002, when it was acquired for US$25 billion by Hewlett-Packard....
after that company purchased Digital Equipment Corporation. The payment system utilized symmetric cryptography.
NetBill
The NetBill electronic commerce project at Carnegie Mellon university researched distributed transaction processingDistributed transaction
A distributed transaction is an operations bundle, in which two or more network hosts are involved. Usually, hosts provide transactional resources, while the transaction manager is responsible for creating and managing a global transaction that encompasses all operations against such resources...
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. Initiated in 1997, NetBill seems to have died completely sometime after 2005.
IBM Micro Payments
IBM's Micro Payments was established c.Circa
Circa , usually abbreviated c. or ca. , means "approximately" in the English language, usually referring to a date...
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".
Online gaming
The term microtransaction is sometimes used to refer to the sale of virtual goodVirtual good
Virtual goods are non-physical objects purchased for use in online communities or online games. They have no intrinsic value and are intangible by definition....
s in online game
Online game
An online game is a game played over some form of computer network. This almost always means the Internet or equivalent technology, but games have always used whatever technology was current: modems before the Internet, and hard wired terminals before modems...
s like World of Warcraft
World of Warcraft
World of Warcraft is a massively multiplayer online role-playing game by Blizzard Entertainment. It is the fourth released game set in the fantasy Warcraft universe, which was first introduced by Warcraft: Orcs & Humans in 1994...
.
Current micropayment systems
Current systems either allow many micropayments but charge your phone bill one lump sum or use funded wallets.The Exception Magazine
The Exception MagazineThe Exception Magazine
The Exception Magazine is an online newsmagazine that covers Maine. It is headquartered in Portland, Maine. The Exception Magazine , which is updated daily during the week, covers Maine news, business, politics and culture...
, an online newspaper based in Maine, launched a micropayment system in July, 2010, which uses a cell phone for payment.
Flattr
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.KlickEx
KlickExKlickEx
KlickEx is a smart market company whose "registered user only" interbank retail systems include a patent pending Private electronic market, providing low cost electronic foreign exchange clearing services to selected clients Australia, New Zealand and the South Pacific.From the Company...
is a Polynesian peer-to-peer interbank clearing network that enables micro-payments to be created and funded from local bank accounts in Australia, New Zealand, Europe or the UK; and be remitted to or from bank accounts in the South Pacific, or directly onto Mobile Phones. KlickEx users (which include by default, most mobile phone users in Polynesia/Micronesia) are connected to real time payments to or from more than 70 million bank accounts world wide.
M-Coin
A service provided by TIMWETIMWE
TIMWE is a Portuguese multinational company that offers a wide range of mobile monetization solutions for mobile carriers, media groups, governments, brands, marketing & advertising agencies and end-consumers....
, M-Coin allows users to make micropayments on the Internet. The users' phone bill is then charged by the mobile network operator.
Payclick
A micropayment system set up by Visa Inc in AustraliaAustralia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
, Payclick allows users to fund an account that is then drawn from when purchases at participating online retailers are made.
Zong
Zong mobile paymentsZong mobile payments
Zong is a mobile payment company that allows users to make micropayments on the Internet if they have a postpaid mobile phone. The payments are charged to their mobile phone bills by the mobile operator...
is a micropayment system that charges payments to users' mobile phone bills. This service can be used to purchase virtual good
Virtual good
Virtual goods are non-physical objects purchased for use in online communities or online games. They have no intrinsic value and are intangible by definition....
s in online game
Online game
An online game is a game played over some form of computer network. This almost always means the Internet or equivalent technology, but games have always used whatever technology was current: modems before the Internet, and hard wired terminals before modems...
s and social network
Social network
A social network is a social structure made up of individuals called "nodes", which are tied by one or more specific types of interdependency, such as friendship, kinship, common interest, financial exchange, dislike, sexual relationships, or relationships of beliefs, knowledge or prestige.Social...
s.
External links
- W3C Micropayment Working Group
- Second generation micropayment systems: lessons learned (PDF), Robert Parhonyi