Micropayments: A Viable Business Model?


The emergence of micropayments in the e-commerce market has long been anticipated. Defined as any online transaction up to $10.00, micropayments allow for a la carte service on the web, replacing alternative subscription models that demand larger upfront payments. Today, users can pay an upfront cost for certain products, such as an access pass to paid content. The system of micropayments seeks to simplify such schemes of e-payment. However, the reason micropayments have yet to catch on in industry is because of the various implementation issues. Micropayment schemes need to make their systems fully reliable, secure, and easy to use. Not only is the billing method a technical challenge, but so is the user interface. Downloading software, authenticating bank accounts, and constantly monitoring charges make the implementation of micropayment schemes difficult at best.

Aside from the implementation challenges, more interesting points arise when assessing the economic and social impact of this concept on the Internet. Most immediately, micropayments facilitate payment to intellectual property owners who do not get paid when files are shared illegally and help consumers itemize their purchases. But what happens when services that are currently free, like digital newspapers, start charging for their services? Does this inadvertently cause a change in usage for those who could once access online material and can no longer due to an additional cost? Micropayments also pose greater concern for user anonymity. Security is a major priority, but when companies can keep track of your personal information, every transaction can make consumers apprehensive of making online purchases. Such social and economic dilemmas are what make implementing micropayment systems complicated. By assessing the technological, social, and economic challenges in current micropayment schemes, we hope to present a convincing justification as to why micropayments are not as beneficial as initially hoped.

About This Project

This project was completed for CS 181: Computers, Ethics, and Public Policy, and was presented on June 2, 2011. For other group websites, check out the archive.