Today’s eCommerce industry allows consumers to purchase nearly anything online, sometimes for little amounts known as micropayments. A transaction that costs less than $1, and occasionally even less than cents, is commonly referred to as a micropayment. You may buy anything with a micropayment, including services like video editing and digital products like songs, movies, and eBooks.
As financial technology, or “fintech,” develops and the Internet keeps providing more digital material and services, 소액결제 현금화 are becoming a more pertinent and secure way to do business.
But how do micropayments work, and how can you include them into your business plan? This article will give several examples of micropayments, discuss their benefits, and offer practical advice for incorporating them into the payment systems used by your business.
How Do You Make Micropayments?
A micropayment is a little sum of money, usually paid online, for modest services or commodities such pay-per-click advertising, digital or physical goods, royalties, gratuities, and freelance work. In periodicals like the New York Times, micropayments have even been suggested as a way to pay for specific online pieces.
Ted Nelson, a technological visionary, coined the phrase “micropayments” in the 1960s. Micropayments were designed to create low-cost networks and cover individual copyrights for online content, not to rely on advertising. Despite the fact that the World Wide Web eventually evolved into a platform for advertising, businesses began utilizing Nelson’s idea of micropayments to allow customers to make little purchases.
Depending on the business and payment processor managing the exchange, different transactions must meet different minimum sizes in order to be classified as micropayments. Any sum under $1 is considered a micropayment, according to certain businesses. Transactions of $5, $10, or even $20 are viewed by some as a form of micropayment, akin to Patreon’s monthly membership fees.
How Do Tiny Payments Work?
There are three ways for customers to make micropayments: pay-as-you-go, prepaid, and post-pay. Every strategy has advantages and disadvantages.
Pay as you go
This tactic merely charges a little one-time price to the customer’s credit or debit card for any product, service, or virtual item. This strategy encourages individuals to buy cheap digital goods on the spur of the moment, which has some advantages.
However, making rash purchases doesn’t encourage clients to come back and keep doing business with the same supplier. More importantly, because the transaction costs for these micropayments are sometimes more than the micropayments themselves, this approach is not always very cost-effective.
Make an advance payment.
If you have ever used actual or virtual gift cards or paid a membership fee to a micropayment processor, you have most likely used prepaid micropayment models. With Prepay, consumers may load virtual currency onto a digital wallet or gift card and use it to pay for minor purchases, such as app downloads or on-demand movies.
Because Prepay aggregates or combines all of a customer’s future micropayment transactions into a single, substantial sum that is paid in advance, it makes transaction costs and processing fees profitable. Customers may make both online and in-person purchases using micropayments with actual gift cards. Additionally, because this virtual currency may often only be used at a certain provider, customers are more likely to return to that business.
After-pay
After a certain number of micropayments, customers who use post-pay make their payment. Once a customer’s purchases have been tracked, retailers charge them all at once. Customers who want to employ this model through a subscription may get monthly invoices for a specific amount in exchange for unfettered access to the digital products and services offered by the supplier.
Post-pay advantages of pay-as-you-go and prepaid. Post-pay encourages customers to make impulsive purchases, just like pay-as-you-go does. Additionally, because clients pay for all of their micropayments with a single, sizable payment, the transaction costs are simpler to manage.
Retailers still need to have a micropayment system that records and aggregates all of their customers’ micropayments in order to manage transaction costs. The potential for some customers to make few micropayments in a given month gives rise to the problem of transaction costs.
Examples of Minor Payments
If you have ever purchased a cheap eBook or downloaded a music from Amazon, you have made a micropayment. Another approach to earn tiny payments is to leave tips using online delivery apps like DoorDash. Streaming services generate revenue by charging a membership fee and allowing customers to purchase movies on demand for nominal fees.
However, there are several other uses for micropayments. In order to verify ownership, Venmo, for instance, will first transfer a little sum (less than $1) into your bank account when you register a new account and link your bank accounts to this mobile payment service.
These micropayments are also collected by Upwork or Fiverr after they receive your fees, stored in a digital wallet, and released to your account when the wallet contains enough micropayments to make a payout if you offer freelance services through platforms like Upwork or Fiverr, where clients only need to pay small amounts for one-time projects.
Google Ads uses a similar tactic with YouTubers and other content creators, including bloggers. These producers use a Google platform to market their content and eventually increase their earnings through ad views and clicks. Once these micropayments reach a certain threshold, such as $100, the content publisher gets paid.
Why Do Businesses Want to Use Micropayments?
For a variety of businesses, from start-ups to large multinationals, micropayments provide a number of benefits. Businesses may increase sales and attract new customers by letting current and potential customers purchase only the films, music, and other content they want.
Offering their consumers the option to pay after making a purchase encourages impulsive buying as well, particularly from those who enjoy downloading inexpensive games and other entertainment content.
