Never heard of a micropayment – well it’s just as simple as it sounds. Micropayments are small scale transactions that range anywhere from less than a penny to $20. This scale of transaction is a way for payment processors to address the frequency with which people are using credit cards to make purchases less than $5.
Think back to when iTunes had songs for 99-cents – or perhaps the $1.99 app you just had to get for your phone. These are all disrupters to the traditional merchant fee companies would pay on a per-swipe basis.
Initially the idea for micropayments was as a way to avoid the advertising-based model that is currently how the internet operates. Imagine rather than constantly seeing ads, you instead paid one ten-thousandth of a penny to view your favorite site? That was what tech futurist and philosopher Ted Nelson had in mind, but that was the 1960’s – and clearly it didn’t happen that way. Perhaps a small part of his vision is still alive each time we click behind the paywalls of a newspaper publication.
Instead, these micropayments enable companies to assist freelancers with finding work without having to worry about what specific rate each freelancer sets for themselves. With micropayments, the money paid for each job is held in a digital wallet until a certain threshold is met and then the worker is paid.
One criticism of micropayments is that the transaction fees can still outpace the payment. This has led to some companies offering a prepaid service in which consumers may credit an account a determined amount to be spent in micropayments. Micropayments are a useful way for companies and individuals to navigate digital-based transactions, and each organization or person should determine how micropayments fit their unique needs.