Can small payments lead to big business?
This article is a crosspost with the Payfort blog.
There was a time when the motto of
the internet was “information wants to be free.” But with more and
more companies looking to cut out advertisers and generate revenue
directly, money is becoming a fundamental aspect of navigating the
internet. This has left many consumers looking for a new kind of
payment platform, one that empowers them to pay smaller amounts and
get exactly the content they want.
Welcome to the world of
‘micropayments,’ a new type of à la carte
consumption where small transactions are going to have a big
impact. Micropayments is a term that describes the transfer
of very small amounts of money, amounts that have traditionally
been too small to be charged to a credit card. These transactions,
though they could be incredibly frequent, see the majority of their
value evaporate instantly because of the associated transaction
fees.
The need for new payment platforms
has led to an explosion of innovative micropayment strategies that
aim to reduce transaction fees and make even the smallest transfers
profitable.
There are three major drivers that
are responsible for pushing the micropayment industry to new
heights:
- The rapid growth of digital content, particularly digital media
such as news, music, videos, etc. - Exponential growth within the mobile app industry and the
accompanying in-app marketplaces. - The growth of social networks and online gaming communities
with their own ‘microeconomies’ (small value credits, in-game
products, virtual currency, etc.)
The above business models all rely
on high volume – low value transactions, the perfect match for
micropayments. As a result a synergetic relationship has formed
that has rapidly accelerated the adoption of various micropayment
platforms.
Micropayments aren’t restricted to
the digital world either. Recently the government of Ajman in
partnership with PayFort, started offering an e-payment option for
parking across the emirate. The new e-payment service replaces the
manual method of using coins and shows that even real world
micropayments, traditionally made with cash, are targets for new
digital micropayment platforms.
As new business models develop, that
aim to sell more products for less, the micropayment industry will
grow to match it. Valued at $9.8 billion in 2013, and expected to
grow to $13 billion in the next few years, there’s no doubt
micropayments are going to be big business.
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