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Micropayments

The term micropayments is used to mean many different things. How big a micropayment is usually depends on how big an average or common payment is for the person using the term. Thus, for corporate transactions, a micropayment may be anything less than $100, whereas for a credit card system it may be anything less than $10. In general, we use the word micropayment to describe small-valued transactions—say, a few dollars or less. In most cases, micropayments are intended for use with online delivery as well: for example, $0.50 for a magazine article. The term nanopayment is sometimes used to describe payments much smaller than micropayments, such as for transactions valued at less than a penny.

Business Models for Micropayments

From a business point of view, the most obvious thing about micropayments is that you really do have to make it up in volume. The arithmetic is simple: if the average transaction size is $0.50, then it takes two million transactions to gross $1 million. Out of that gross come the costs of the computers for handling the transactions and fulfilling the orders, the software for processing the microtransactions, the salaries of the operators to keep them running, power and air-conditioning, and so on. At this stage in the evolution of Internet commerce, micropayment systems do not yet seem to pay for themselves on a large scale.


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