The payment landscape is slowly changing to accommodate a variety of situations. While the Internet has dramatically reduced the distribution costs of music and other forms of intellectual property, the fact remains that artists and writers must be compensated, albeit at a fraction of current costs. Yes, we are talking pennies and cents.
Under this scenario, would you use a credit card? Probably not. Merchants typically disallow the use of credit cards for purchases below $10 because of the high transaction costs involved. And, consumers would not want to increase their exposure for such small purchases.
This paves the way for micropayments. However, for a system of micropayments to succeed, it must be easy to use, secure and private. Micropayments come in different flavors.
Electronic cash can be dispensed through smart cards. These cards store monetary value in an embedded microchip. Each time the card is used to pay for a purchase on the Internet, the purchase amount is automatically deducted from the balance.
You can buy Internet Cash in denominations of up to $100 at retailers and then spend cash online at participating sites. Consumers who purchase Internet Cash receive an Internet ID. Once activated on the InternetCash.com web site, the shopper uses their ID and a unique password to shop online securely and anonymously.
Direct transactions between individuals and e-tailers require card issuers to launch credit cards with smart card technology. They also require PCs and Internet appliances to be outfitted with readers and operating systems supporting smart cards. This is starting to happen. For example, Master Card is experimenting with Mondex . Microsoft is including support for smart cards with Windows 2000. And, Sun is providing similar support with its Java Card platform.
Micropayments can also be made through intermediaries such as iPin and Qpass . With both intermediaries, consumers provide billing and personal information only once at registration. Then, they make use of the provided password or PIN number to buy at participating sites.
Qpass has partnered with many distinguished publishers including the New York Times and only bills consumers once a month. With the iPin technology, a consumer can choose to pay for his online purchases by debiting his bank account or charge it to his ISP, telephone or credit card.
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