Making Micro Payments Work - Mobile World Live

Making Micro Payments Work

03 NOV 2009

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I do my best to avoid writing
blogs about themes or articles posted on Mobile-Financial, as I want to keep
delivering interesting content to our reader base that is different from the
articles that are already posted.  I see this as a duplication of content
in some sense, even if I offer an alternative point of view. However, with that
said, sometimes it is great to call attention to articles that are very good
and present a diverse set of viewpoints.  

There is an excellent article in the E-Commerce Times focusing on the
challenges and opportunities with making the micro-payments model work.  The author, Mr. Sheehan, asserts that
only digital content will work with on-line micro-payments.  Digital content can be readily downloaded,
as opposed to physical goods that require shipping & handling and inventory
storage that quickly makes them cost prohibitive.

The article focuses only on digital content, but I also believe domestic
Peer-to-Peer transfers can also be included into the micro-payment model.
It has all the same features
of digital content. I would also include payments for online poker and
other gambling sites, as credit card companies typically reject these
transactions.  The article also discusses that although PayPal and Google
Checkout try to get creative processing payments, in the end, a credit card
largely, or completely, processes the payments.

So what can we conclude?   Three major transactional opportunities
exist where credit cards cannot properly support the payments. To reiterate, these
are:

1)  On-line digital content (Low or Zero variable cost)

2)  Domestic Peer-To-Peer

3)  Online Gaming

In the E-Commerce times article, Mr. Sheehan
suggests the ACH (Automated Clearing House) system as an alternative solution.
I agree this could be leveraged, but has some serious issues that need to
be addressed first. In the mean time there are many vendors and providers
trying to proactively solve this issue by creating closed loop systems, or
systems supported by cards.  However, no one is addressing the key business drivers, which
are consumer convenience and low cost payment processing.

For example:

1)  Online gaming sites allow a variety of payment options, each mixing
and blurring the line of customer convenience and cost efficient processing.
Western Union payments, credit cards and ACH payments are examples of
these options.   

2)  Payment options for zero variable
goods are numerous.  Currently, premium SMS is very popular, but missing
the mark on cost efficient processing. 
These of course do not work when there is variable cost associated with
the content.

3) 
PayPal is primarily supporting Peer-To-Peer payments, but we have
already identified that this is not cost effective and typically processed by a
credit card company.  

Whether it is a credit card company,
financial institution or a service like Google Checkout or PayPal, someone will
make this model work.  The focus
will likely be on one area, such as digital content, and if it can work for one
area, then basically all that is required to succeed in the other areas is to
change the marketing materials.    

 

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Ecommerce Times Article

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Micro-Transactions Easy and Cheap

 

 

 

Read more: http://mobile-financial.com/node/3119

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Mobile World Live

Mobile World Live is the online service dedicated to providing the mobile industry with daily news coverage & analysis of the biggest global market developments.

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