Paypal is probably the world’s best known payment and money transfer service online. The service provides Internet users with a fast and safe way to send money, make online payments, receive money or set up a merchant account. The company has recently announced that it plans to make it easier to buy low-cost digital goods online and is currently preparing a payment product which it will release by the end of this year. The payment product will allow businesses to collect micropayments on the web, according to Scott Thompson, the online payment service’s president. Micropayments are everything you can think of that’s small in value from purchasing an article off a news website or items in your favorite online game.
Until now if you were interested in buying something small, you’d first have to purchase some credit in the $5-10 area. This would all happen for making a very small payment of, say, 20-30 cents. This was happening because the costs associated with credit card transactions would completely eliminate the profit a merchant would make out of something that has a very low purchasing cost. This however greatly limits consumers who want to buy items one at a time. Thompson says this is the main reason behind their new product and PayPal will soon allow purchases in small increments.
Of course, most Internet services have become quite popular. People are now interested in purchasing items on online games, paying for downloading a song or video. To make it more convenient for users to make such purchases Paypal is planning to compie consumers’ transactions. The company that’s owned by EBay figures that it could be possible to bill a user
only after that user gathers about $10 worth of purchases.
According to Thompson, last year about $2 billion of PayPal’s $71 billion in payment volume came from digital goods such as downloads of music, videos or software that people bought online. This type of purchases seems to be constantly growing, as shown by the growth the company recorded, from $1.3 billion coming from digital goods payments in the first half of this year.
The new product is not the company’s attempt to tackle micropayments. PayPal has also offered merchants a micropayment option that can be implemented on websites, which would charge a fee of 4 percent plus 5 cents for small transaction of under $10 for a given product.
If a payment of $3 would normally cost a company around 39 cents under PayPal’s normal fee schedule, through the micropayment system it would be considerably more affordable at 20 cents in transaction fees. This still doesn’t please Thompson who thinks the upcoming product will be considerably better.
People who want to buy items in various online games and use PayPal will have to briefly leave the game to make the actual payment. This is also pretty inconvenient for most users and will change in the future. This is what Thompson had to say about it : “The whole intent is to keep you in the experience, don’t force you to do anything else … and keep it economical for all parties”.
