Credit Card Micropayments About to Surge
A 50¢ credit card charge to read an article online? A buck to skip the cash register? It’s coming soon.
Online and mobile commerce is about to get a shot in the arm. Online payment service PayPal is opening the door to widespread use of credit and debit cards for so-called micropayments -- as small as half a buck and up to about $12. Instead of charging retailers for each separate card transaction they handle, the company plans to aggregate a merchandiser’s micropayments and levy a single fee for the bundle.
Cheap processing of micropayments is hailed as the answer to many sellers’ prayers. Publishers, for example, have long bemoaned the inability to cost-effectively sell newspaper or magazine articles or other content online “by the drink.” Until now, print media haven’t been able to find a business model to sell their content online, says George Peabody, director of the Emerging Technologies Advisory Service at the Mercator Advisory Group, a payments and banking consulting firm. Jason Pavona, executive vice president of sales and marketing for Litle & Co., which provides payment management services, agrees, noting that efforts such as PayPal’s could help media companies develop a whole new business. Other purveyors of print could benefit, too -- independent authors could sell chapters of their books as one-offs, for example.
Cheaper processing is also likely to pay off for industries that already use micropayments, such as online gaming companies, ringtone merchants and smart phone application marketplaces. Social media and gaming firms are among those exploring their own ways to process micropayments more cheaply to support their industries. Others set to benefit: The thousands of craftspeople and other individual entrepreneurs who sell low value goods -- on Etsy or other electronic marketplaces.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
“The absence of a simple, secure low cost payment solution has been suppressing new business models, particularly in e-commerce and the nascent m-commerce market,” says Conrad Sheehan, founder and chief executive of mPayy a payments provider. By routing mobile transactions through automated clearinghouses instead of requiring credit and debit cards, mPayy is able to process mobile transactions at very low cost to merchants.
The cheaper processing fees may even foster the development of a “microservice” industry. Businesses may begin to charge for services that were previously free, once there’s a feasible and cost-effective way to charge for them, says Brian Shniderman, a director with Deloitte Consulting’s banking team. Restaurant patrons may be willing to pay a dollar or two, using their cell phones, to head to the front of the queue at a popular eatery, for example -- a high-tech way of greasing the palm of the maître d’. Or at a bricks-and-mortar retailer, customers may be able to skip long lines the same way. In-a-hurry shoppers might be directed to a designated register or a line-free self-check-out kiosk or even be able to complete the transaction on their phones.
Right now, the high cost of processing low value online transactions keeps some merchants from offering low priced options. PayPal’s current fee to process payments under $12 is 5% plus 5¢ per micropayment transaction. For bigger transactions, it’s between 1.9% and 2.9% of the sale amount plus 30¢, depending on the merchant’s volume of business. Even if the fee structure remains the same, aggregating the transactions would mean paying a fee based on a lower percentage, albeit on a higher total.
Of course, the effort isn’t new. It has been tried -- and failed to take off -- before, notably in the mid-2000s. But this time, it’s different, say the experts: Consumers are far more comfortable with buying online -- even ordering groceries online. Mobile commerce is booming. And a trusted name in the payments business -- PayPal -- is leading the way.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
The Surprising Truth About Loneliness and Longevity
We've all heard about the epidemic of loneliness that can shorten lives and make retirement miserable. But there's more to the story.
-
The Dollar Index Is Sliding. Is Your Portfolio Prepared?
The Dollar Index Is Sliding. Is Your Portfolio Prepared? The dollar's fall has been troubling because inflation appears to be constrained and the economy has been strong. Here's what it means for investors.
-
AI-Powered Smart Glasses Set to Make a Bigger Splash
The Kiplinger Letter Meta leads the way with its sleek, fashionable smart glasses, but Apple reportedly plans to join the fray by late 2026. Improved AI will lure more customers.
-
Breaking China's Stranglehold on Rare Earth Elements
The Letter China is using its near-monopoly on critical minerals to win trade concessions. Can the U.S. find alternate supplies?
-
Things that Surprise Business Owners When It’s Time to Sell
The Kiplinger Letter When it’s time to retire and enjoy the fruits of growing their business, owners are often surprised by how tough it is to give up their baby!
-
What New Tariffs Mean for Car Shoppers
The Kiplinger Letter Car deals are growing scarcer. Meanwhile, tax credits for EVs are on the way out, but tax breaks for car loans are coming.
-
AI’s Rapid Rise Sparks New Cyber Threats
The Kiplinger Letter Cybersecurity professionals are racing to ward off AI threats while also using AI tools to shore up defenses.
-
Blue Collar Workers Add AI to Their Toolboxes
The Kiplinger Letter AI can’t fix a leak or install lighting, but more and more tradespeople are adopting artificial intelligence for back-office work and other tasks.
-
The New AI Agents Will Tackle Your To-Do List
The Kiplinger Letter Autonomous AI agents “see” your computer screen, then complete a task, from buying a concert ticket to organizing email. This opens up a world of possibilities.
-
AI’s Medical Revolution
The Kiplinger Letter Medicine is a field ripe for finding both exciting and practical uses for AI. The tech is already being used by doctors and researchers.