With PayPal Backing, Will Micropayments Work This Time? - ' Micropayments Are Big Business '
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A micropayment may be a small individual purchase, but it is also big business. Estimates vary, but most industry experts estimate the potential for online micropayment-based purchases at about $5 billion a year and growing.
But micropayments are not necessarily limited to online. As retailers start looking at almost all small cash purchases as potential micropayments, the effort to create transaction fees that work for small purchases could impact online as well as offline.
The market for all micropayment transactions is in excess of $1 trillion a year, Ashley and others said.
Those non-Web microtransactions include tolls, snack machines and fast-food. Quick-service restaurants like McDonalds have already started pushing credit cards aggressively.
Contactless payments may accelerate some of those physical world micropayment options, assuming the back-end transaction fees can be worked.
A key (although much smaller) eBay rival, Peppercoin, Inc. of Waltham, Mass., is experimenting with a wide range of non-traditional micropayment options, including allowing people in Las Vegas to pay for their parking meters with their cell phones rather than with their quarters.
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"The micropayment market has clearly emerged," said Peppercoin CEO Mark Friedman.
In the online world, though, pricing expectations are being set by a handful of e-commerce micropayment pioneers.
"iTunes has done a great job of setting the consumer price expectation of 99-cents" for a song download, Ashley said.
There is also disagreement within the industry of whether credit card companies will see these moves by executives at companies like PayPal and Peppercoin as competitors trying to horn in on traditional credit card turf or as helpful partners trying to increase overall marketsize for micropayments.
At PayPal, for example, "a little more than 50 percent" are ultimately funded with credit cards, Ashley said, with the rest typically paid for with bank account debits.
One e-commerce segment that has often been seen as an ideal micropayment segment is adult-oriented images and videos, but PayPal has stopped supporting that segment because fraud attempts and credit card chargebacks were too high, Ashley said.
Retail Center Editor Evan Schuman can be reached at Evan_Schuman@ziffdavis.com.
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