Economy: Micropayments

WILL MICROPAYMENTS TAKE OFF?

For years, developers and investors have tried to create a system to collect micropayments [Wikipedia] for online goods or services. Web businesses have been stuck between free/subsidized, and about $1-$5, since the charges for credit card processing don’t usually justify payment processing for items less than $5.

This has led to advertising as being the only viable web model for businesses that might rely on micropayments. Following a 15% growth in $11 billion in the first half of 2008, Web advertising is taking a hit from its exponential web growth with the economic downturn, as reflected in the PubMatic Ad Price Index.

A NEW REVENUE OPTION FOR WEB BUSINESSES

Multiple platforms have been designed to handle auto-payments from a fraction of a penny to a dollar, but none have gained traction in the market.

Henry Blodgett today focuses on the application volume that Apple, Facebook and MySpace have generated, leading to one or more micropayment systems likely this year. This should have a major impact on web-based financial transactions.

I’m also curious to watch if it will impact the free labor market that Business Week chats about in Will Work for Praise: The Web’s Free-Labor Economy.

SHOULD BANKS BE WORRIED? SHOULD YOU?

Something is going to fill the void created by financial institutions not making cash flow available to small businesses and the coming implosion in credit card availability, as noted in the Reuters article Credit-card industry may cut $2 trillion lines: analyst. Micropayments could fill some of that hole very quickly.

Will you utilize micropayments? And given the projected credit card squeeze, how will you offset your use of credit cards for business transactions?