It's A Small Payment After All

Look after the nickels and dimes and the dollars will look after themselves. Remember that from gramps? Well, the micropayment industry is taking that adage to the bank. It’s time to cash in.

As micropayments make their comeback, more and more companies are trying out the waters. But as additional businesses enter into the market, the harder it is for enterprises to decide which provider is best for them.

Choosing a micropayment provider doesn’t have to be a difficult process, but there are a few things merchants should keep in mind.

“The first thing you want to look for in a micropayment provider (is) the lowest fees you can possibly get… The ability to support various small payments and still make a profit is the real problem that micropayments solve,” said Rob Carney, vice-president of Sales and Marketing at Peppercoin, Inc. “The second component is how easy it is for you, as either a service provider or a merchant, to implement. Is there going to be an overhaul of your commerce site required… You also have to keep in mind what the experience will be like for the consumer. How low a barrier can you set for them to spend with you?”

What else should merchants look for?

“Merchants should look at micropayment solutions that can integrate into their existing platform, provide a simple accounting system with no hidden fees, have a flexible pricing model and have excellent technical support,” said Adonis El Fakih, president and CEO of Centipaid.

Having a micropayment provider that consumers are comfortable with is ultimately the key to success.

“I think the Internet is a really good medium for impulse buying, and so I think that if you make someone put more money down or make more of a commitment than they really want to, that does not encourage commerce,” said Carney. To make the process a little easier, here is a list of four companies that have already established themselves worldwide:

PayPal

With over 16 million registered users (three million being business accounts), and its customer base growing by about 28,000 new users each day, it is no wonder PayPal is the world’s largest micropayment provider. Anyone with an e-mail address in the 38 countries that PayPal services can start accepting credit card payments instantly, in U.S. or Canadian dollars ($), Euros (€), Pound Sterling (₤) and Yen (¥). There is no fee to sign up and consumers can use the service free of charge. Businesses do not have to pay any fees for sending money, but there is a small charge when getting paid.

Centipaid

Offering micropayment services for content, e-mail and service providers, the Centipaid system is unique. Consumers pay for their goods and services by uploading an encrypted JPEG image, called CENTIPIX, which avoids any personal information from being revealed during the transaction. This system is designed to process payments from $0.001 (less than one penny) to $50.
“We work with each merchant to optimize their micropayment implementation, by explaining to them how to introduce the paid content and CENTIPIX,” said El Fakih. “Our experience in this field has helped many of our merchants understand micropayments and adjust their pricing plan to meet the demand on their site.”

Centipaid boasts the lowest commission rates in the industry and offers free integration tools to collect micropayments.

“Centipaid has several advantages to merchants looking for micropayment providers which include the lowest fees,” said El Fakih. “Centipaid uses a variable commission structure that allows us to maintain the lowest fees in the market, and allows our merchants complete freedom in setting their pricing.”

Paystone

After three years of product testing and development, Paystone emerged as an industry leader in micropayment processors. Designed to handle transactions as low as $0.25, Paystone allows anyone who has an e-mail address to buy or sell information from the Web. Funds can also be transferred via this service.

Vendors know payment has arrived when they receive an e-mail telling them so.

Peppercoin

Peppercoin is one of the least expensive and most secure ways to buy and sell content online. So what is their secret?

“A lot of the new micropayment companies that are out there… their way around the problem of costs is to ask the consumer to pay a lot of money upfront,” said Carney. “Peppercoin is, I think, unique in that we are a post-paid system, pay-as-you-go. If you are going to sell something for a quarter, you charge a quarter. That is it. You don’t ask them to put up $10, which is sort of a little counterintuitive.”

Consumers can use their Peppercoin account over many sites, therefore making it a universal system and convenient for all users. It helps to keep transaction fees low because fewer merchants are using a third party.
“We have no fixed cost component per transaction… What we have done is eliminate the fixed component of the cost structure, and replaced it with just a flat percentage,” said Carney. “And that is anywhere from seven to 10 percent, depending on volume.”

Payments are administered through a complex system of cryptography, digital certificates and mathematical algorithms. Each payment is made in “PepperCoins” (digital “cheques”), which can only be signed by the consumer and are only payable to the owner of the Website. It is valid for a short time and if intercepted, it becomes useless.

Peppercoin packages 100 small transactions into one, and attaches a sequence number for identification. When processed by the bank, the amount is broken up using simple mathematics, ensuring the merchant, financial institution and Peppercoin all receive the correct amount of money. At the same time, the bank only has to charge 1/100th of its usual fee.

And all of this can be set up within 10 minutes, according to Carney.