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Definition

micropayment

A micropayment is an e-commerce transaction involving a very small sum of money in exchange for something made available online, such as an application download, a service or Web-based content.

Micropayments are sometimes defined as anything less than 75 cents and can be as low as a fraction of a cent. A special type of system is required for such payments, which are too small to be feasible for processing through credit card companies.

Here's one scheme for micropayment: The user and seller each establish an account with a third-party service provider who monitors, collects and distributes micropayments. The seller encodes per-fee links inside a Web page. When the user initiates a transaction, payment goes through an Internet wallet account managed by the service provider. Micropayments accumulate until they are collected as single, larger payments. Such a system is helpful when a user wants to make one-time micropayments to multiple sellers. Seller-based accounts are more common for repeat business with an individual enterprise.

Once a common micropayment standard has been established, some experts predict that streaming media sites, music and application downloads, content vendors, sports access sites and other specialized resources will make pay-per-use common online.

 

Learn More About IT:

> Wikipedia has an entry about micropayments.
> Steve Smith discusses micropayments in his post, 'Pay to Play 3.0: Same Old Tune?'
> On TechDirt, Mike Masnick explains the many reasons he doubts that micropayments will work.

This was last updated in June 2009

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