Micropayments an Up-and-Coming Trend

Keep your eye on micropayments. They're a growing trend in eCommerce.



Micropayments are small payments made for online purchases valued at $2 (US) or less. These small payments are charged for items such as mobile phone ringtones, digital music, games, recipes, comics and stickers. Mostly they're for impulse purchases, and often -- but not always -- made by teenagers.



For really small payments, merchants can't realistically accept credit cards. The processing fees tend to gobble up any profit margin. Furthermore, teenagers making these small purchases often don't have credit cards. Hence, the need for new methods of transmitting small payments.



The concept of micropayments has been around for at least five years. When I was in charge of eCommerce for a NYSE company back in 1999, an employee brought me a business plan seeking to develop a new business centered around micropayments. Micropayments did not fit in with the company's strategic direction, and so we declined to move forward with it. But at the time I thought the concept held promise and believed that eventually some company somewhere would make a go of it. And it is beginning to look that way -- only five years later.



What's spurring on micropayments is the rise in digital content sales, especially music downloads. "The music industry has recently forged new ground and proven the viability of the micropayments model. Now it is up to other online merchants to find new ways to package their existing content and to develop new, innovative content to grow this market," said Robert Kiburz, president and CEO of Peppercoin, a micropayments provider.



According to a survey performed by Ipsos for Peppercoin, more than 4 million Americans purchased digital content for less than $2 in the past year. Now, in overall numbers, that's a drop in the bucket compared to the billions spent online for all purchases. But the demand for micropayments is sure to grow as digital music sales grow. With music sites like iTunes charging 99 cents (US) for a tune, and Rhapsody charging as little as 79 cents (US), retailers have to save every penny they can on credit card fees.



Another micropayment provider is Bitpass. The Bitpass site even includes a list of merchants who accept Bitpass micropayments. There you can find places to spend your shekels on things like: Geeks in Love comics, iStockphoto.com photographs, and even Guy Kawasaki's speeches.



Micropayments could open up new opportunities for smaller merchants to sell small items of content at a profit. Look for more from us on this subject as this trend develops.