Micropayment

This article needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (August 2007)

Micropayments are financial transactions involving very small sums of money. PayPal defines a micropayment as a transaction of less than 12 USD,^[1] and offers less expensive fees for micropayment transactions. A problem that has prevented the emergence of feasible micropayment systems that allow payments of less than a dollar is a need to keep costs for individual transactions low,^[2] which is impractical when transacting such small sums,^[3] even if the transaction fee is just a few cents.

History

Micropayments were initially devised as a way of allowing the sale of online content and were envisioned to involve small sums of only a few cents.^[3] These tiny transactions would enable people to sell stuff on the Net for small sums^[3] and would be an alternative to advertising revenue.^[4] During the late 1990s there was a movement to create microtransaction standards,^[3] and the World Wide Web Consortium (W3C) worked on incorporating micropayments into HTML, even going as far as suggesting the embedding of payment requests in HTTP error codes.^[2] The W3C has since stopped its efforts in this area ^[2] and micropayments never became 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,^[3] and research on micropayments and micropayment standards was performed at Carnegie Mellon and by the World Wide Web Consortium.

Compaq's^[3][5] Millicent was a micropayment system that supported transactions as small as 1/10th of a cent up to $5.00 in size.^[6] It grew out of The Millicent Protocol for Inexpensive Electronic Commerce, which was presented at the 1995 4th World Wide Web Conference in Boston.^[7] Millicent utilized symmetric cryptography.^[8]

IBM's Micro Payments was established circa 1999^[9] and would have "allowed vendors and merchants to sell content, information, and services over the Internet, for amounts as low as one cent."^[10]

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.^[11] It utilized a pre-paid account that micropayment charges would be drawn from.^[12] Started in 1997,^[13] it was an early foray into microtransaction research.

Online gaming

Micropayments are used in some massively multiplayer online role-playing games (MMORPGs). These are typically free to play games with no monthly fee, which offer players the possibility of purchasing in-game currency redeemable for items. These items are often more powerful than those that can be obtained by non-paying players or offer an advantage or feature otherwise unavailable.

See also

• Peppercoin
• CyberCash, Inc.

References

External links

Implementation

• W3C Micropayment Working Group

The micropayment debate

• The Case For Micropayments - Jakob Nielsen (1998)
• The Case Against Micropayments - Clay Shirky (2000)
• The Digital Imprimatur, How big brother and big media can put the Internet genie back in the bottle by John Walker.
• The Mental Accounting Barrier to Micropayments - Nick Szabo
• Fame vs Fortune - Clay Shirky (2003)
• Misunderstanding Micropayments - Scott McCloud (2003), answering to Clay Shirky
• Second generation micropayment systems: lessons learned (PDF), Robert Parhonyi
• A one year report on a micropayment funded website; importance of ease vs. amount - Reichler 2008
• Norman Hardy and Eric Dean Tribble: The Digital Silk Road September 1995