PayPal leads the way for processing small-denomination purchases
Online and mobile commerce is about to get a shot in the arm. Online payment service PayPal is opening the door to widespread use of credit and debit cards for micropayments -- as small as half a buck and up to about $12. Instead of charging retailers for each card transaction they handle, the company plans to aggregate micropayments and levy a single fee for the bundle.
Cheap processing of micropayments is hailed as the answer to many sellers' prayers. Publishers, for example, have bemoaned the inability to sell newspaper or magazine articles or other content online in a cost-effective way.
Until now, print media haven't been able to find a business model to sell content online, says George Peabody, of Mercator Advisory Group, a payments and banking consulting firm.
Jason Pavona, sales and marketing executive for Litle, which provides payment management services, agrees, noting that efforts such as PayPal's could help media companies develop a new business. Other purveyors of print could benefit, too -- authors could sell chapters of their books as one-offs, for example.
Cheaper processing also will probably pay off for industries that already use micropayments, such as online gaming companies, ringtone merchants and smartphone application marketplaces. Social media and gaming firms are among those exploring ways to process micropayments more cheaply to support their industries. Others that could benefit: the thousands of craftspeople and other individual entrepreneurs who sell low-value goods -- on Etsy or other electronic marketplaces.
"The absence of a simple, secure low-cost payment solution has been suppressing new business models, particularly in e-commerce and the nascent m-commerce [mobile commerce] market," says Conrad Sheehan, founder and chief executive of mPayy, a payments provider. By routing mobile transactions through automated clearinghouses instead of requiring credit and debit cards, mPayy is able to process mobile transactions at low cost to merchants.
The cheaper processing fees might even foster the development of a "microservice" industry. Businesses could begin to charge for services that were previously free, once there's a feasible and cost-effective way to charge for them, says Brian Shniderman, a director with Deloitte Consulting's banking team.
Restaurant patrons might be willing to pay a dollar or two, using their cellphones, to head to the front of the queue at a popular restaurant, for example -- a high-tech way of greasing the palm of the headwaiter. Or at a bricks-and-mortar retailer, customers might be able to skip long lines. Hurried shoppers might be directed to a designated register or an open self-checkout kiosk or even be able to do the transaction on their phones.
-- Kiplinger's Personal Finance