Micropayments are a means for transferring very small amounts of money, in situations where collecting such small amounts of money with the usual payment systems is impractical, or very expensive, in terms of the amount of money being collected. "Micropayment" originally meant 1/1000th of a US dollar, meaning a payment system that could efficiently handle payments at least as small as a mill, but now is often defined to mean payments too small to be affordably processed by credit card or other electronic transaction processing mechanism. The use of micropayments may be called Microcommerce.
Generally, micropayment systems accumulate many micropayments, and collect the accumulated amount of money as one regular payment either before or after the transactions. Examples of situations where micropayment systems (according to the broad definition) are often used in the United States include public transportation systems, university student dining rooms, and tolls on roads. These are all areas where it would be impractical or awkward in terms of practicality to collect the price of the service from the consumer each time a service is rendered. However, these systems have a granularity of no less than one cent: they fit the currently popular but not the original definition of micropayments.
There has been a great deal of recent innovation in micropayment systems, in order to facilitate providing content for a fee over the Internet. Many payments are made with credit cards, but processing a credit card payment typically costs the merchant a fee with a minimum on the order of 20¢ plus a few percent of the amount of the charge.
These new micropayment systems are the result of an evolutionary process among Internet content providers. In the early days of the World Wide Web, content would usually be made available for free by organisations such as universities.
With phenomenal growth of the Internet people soon began to seek various means of earning money from content. Advertising is one such form of revenue. Content would be offered for free, with accompanying ads or links to sponsor sites. Other content providers have also experimented with subscriptions, where people would pay for access to content for some period of time. A third form of revenue comes in the form of donations solicited by the content provider.
Micropayments present a relatively recent innovation in the online revenue stream. The basis of micropayments would be to maintain and take advantage of the very high volume of viewers by offering content for a very low price. For example, a webcomic author would make his online comic book available for 25¢ (USD). Other variations on the idea propose charging fractions of cents (that is, smaller than the smallest possible amount of hard currency) for equally fractional amounts of contents, for example, a tenth of a cent per single web page in an online magazine.
Generally, micropayment systems accumulate many micropayments, and collect the accumulated amount of money as one regular payment either before or after the transactions. Examples of situations where micropayment systems (according to the broad definition) are often used in the United States include public transportation systems, university student dining rooms, and tolls on roads. These are all areas where it would be impractical or awkward in terms of practicality to collect the price of the service from the consumer each time a service is rendered. However, these systems have a granularity of no less than one cent: they fit the currently popular but not the original definition of micropayments.
There has been a great deal of recent innovation in micropayment systems, in order to facilitate providing content for a fee over the Internet. Many payments are made with credit cards, but processing a credit card payment typically costs the merchant a fee with a minimum on the order of 20¢ plus a few percent of the amount of the charge.
These new micropayment systems are the result of an evolutionary process among Internet content providers. In the early days of the World Wide Web, content would usually be made available for free by organisations such as universities.
With phenomenal growth of the Internet people soon began to seek various means of earning money from content. Advertising is one such form of revenue. Content would be offered for free, with accompanying ads or links to sponsor sites. Other content providers have also experimented with subscriptions, where people would pay for access to content for some period of time. A third form of revenue comes in the form of donations solicited by the content provider.
Micropayments present a relatively recent innovation in the online revenue stream. The basis of micropayments would be to maintain and take advantage of the very high volume of viewers by offering content for a very low price. For example, a webcomic author would make his online comic book available for 25¢ (USD). Other variations on the idea propose charging fractions of cents (that is, smaller than the smallest possible amount of hard currency) for equally fractional amounts of contents, for example, a tenth of a cent per single web page in an online magazine.