Micropayment

A micropayment is a financial transaction involving a very small sum of money and usually one that occurs online. A number of micropayment systems were proposed and developed in the mid-to-late 1990s, which were ultimately unsuccessful. A second generation of micropayment systems emerged in the 2010s.

While micropayments were originally envisioned to involve very small sums of money, practical systems to allow transactions of less than 1 USD have seen little success. One problem that has prevented the emergence of micropayment systems is a need to keep costs for individual transactions low, which is impractical when transacting such small sums even if the transaction fee is just a few cents.

Definition

There are a number of different definitions of what constitutes a micropayment. PayPal defines a micropayment as a transaction of less than £5 while Visa defines it as a transaction under 20 Australian dollars.

History

Micropayments were initially devised as a way of allowing the sale of online content and as a way to pay for very low cost network services. They were envisioned to involve small fractions of a cent, as little as US$0.0001 to a few cents. Micropayments would enable people to sell content on the Internet and would be an alternative to advertising revenue.