What is Micropayment? Meaning and Importance

Have you ever had to make a payment for downloading an application or an e-book? Do you know what that payment is known as? Well, it is known as micropayment, and that is exactly what we are going to talk about right now.

We have all probably made some sort of small payments on the internet to have something provided to us. Whether it is a book or an application, these payments are pretty much common. In the micropayment, there is a very small amount that people have to pay to get the product that is available online. It’s an ecommerce payment.

However, micropayments are very important for businesses because of these help in their business operations in the best way. So, to make sure that the concept is properly understood to the people, we are going to provide some information about it in detail so that you can understand it in a better way for the best of results.

What Is Micropayment?

To fully understand the concept of micropayment, you need actually to know how it is done in the first place. This is to make sure that you have an understanding of the whole thing.

So, we are going to define micropayments right here. Well, the micropayments that you do can be termed as the transaction taking place in an e-commerce store.

In the micropayment, there is no doubt that there will be a very small amount that people have to pay to get the product that is available online.

In some cases, it is an application that they want to download, and in other cases, it is a basic service or some content that they want to read. These micropayments are pretty common amongst the people who want to have some product delivered to them as well.

There are many different options when it comes to the micropayment for sure. The payment could be as short as 75 cents in some cases, and then it could be just a small fraction of the cents as well.

There is a very special system provided to make sure that the micropayments are happening in the best way. These systems are pretty small. Hence, the credit card companies will not be able to use it for the transactions for sure.

There is a proper scheme for the micropayment that the people need to know about for sure. In this particular scheme, there will be a user and a seller right there.

They both will have an account, and there will also be a provider of service from another company who will be able to monitor and then collect the micropayment and then distribute them as well.

The seller in this transaction will encode the per-free links which are included in the web page of some sort. On the other end, when a user will be able to initiate the transaction, the payment will go through a particular internet wallet that is present there, and this service provider manages this internet wallet from the 3rd party.

The micropayments will be accumulated properly until and unless these are collected by the seller when there is a single and much larger amount in the wallet.

This system tends to be very helpful when it comes to making the one-time payments and that too, with different sellers at one time. The seller accounts are pretty much common for the businesses that tend to work for a particular and single enterprise.

This is one of the most important reasons why people tend to use the service of micropayments to complete their tasks in the best way.

After the establishment of the common micropayment standard, certain experts tend to make some prediction for the micropayment.

It has been predicted that the media sites, application downloads, music downloads, content creators, sports sites and some other specialized forms of resources will always tend to use this amazing pay-per-use method of online payment.

So, micropayments are going to be a very popular thing in the world in the coming years. That is why people need to know more than they can talk about micropayments so that they can utilize it in the best ways for sure.

Why is the Micropayment System Important?

With the advancement in technology, there is more inclusion and exposure to the digital world in here. The finance industry is also growing a lot and making some financial products that are available for the betterment of the people.

So, the products are being delivered to the public at a very affordable rate, and they only have to make a payment of a small amount of money to get the products that are available to them.

These are some of the most common technological efforts which are made by the company for their clients and customers. The customers have experienced a lessening in the costs from these methods, and they only have to pay a few cents to get the service and the products available to them online.

However, there is a problem with the micro fees that they have to pay.

The problem here is that the amount is too small. So, the credit card machines and companies are not able to process the payments that are being made.

Hence, there is the emergence of micropayment systems, which has made it a lot easier for people to make lesser payments and then get more and more benefits from it.

There is no doubt about the fact that this payment system has been providing a lot of benefits to the customers as well as the companies that are delivering the product to the customers out there who are in need for it.

So, it is really important that people get to know all the details about the system of micropayments to have the best results that are available for them in the best ways.

Micropayments: How Does It Look In Practice

There are many different ways in which the micropayment systems can work. These systems were designed in order to handle all the smaller transactions that took place, and there are different ways in which these systems are able to help the people out there.

One of the most common ways is that the seller or the person who is providing the service will have a proper account that is established along with the micropayment provider who will act as the 3rd party in here and he will be the person to store and distribute the amount after collecting it.

The third-party service provider will be the person to make sure that the payment is being properly made in the first place and that too, without any hassle or trouble, to begin with.

Through the technology of a wallet, which is digital, that is managed by the service provider; the payment will easily be stored. The micropayments that are being made by the customer will be stored in this particular wallet for an indefinite period.

Once the payments which are being made by the customer start to accumulate and become a large amount in total, then it will be taken out by the service provider. This payment will be then forwarded to the person who is supposed to receive the money in the first place.

Examples of Micropayment

Let us provide you with an example so that you can understand the concept in a better way. We take the example of Upwork in here.

This company is basically a website that would easily match freelance workers with some of the best companies that are providing some sort of temporary projects at a particular fee.

Let us say that there is a company who wants to hire a particular video edit and that too from Upwork. The company wants to have the editor so that he can help in the editing of certain commercial videos that they have.

The rate of the project is set to be 5 dollars for an hour of work. In the freelance worker can complete the work within 4 hours in total, the company will have to make the payment to Upwork.

Then Upwork will be collecting the money and then will store it in a proper and established digital wallet on behalf of the freelancer. As time goes by, the freelancer will start to get more and more jobs too, and there will be more payments made as well.

So, Upwork will then rack up all the IOUs of the freelancer until the digital wallet accumulates all the money and it turns into a larger amount.

In this case, let us say it adds up to about a thousand dollars. At that point, Upwork will make the payment and provide all the money to the account of the freelancer.

Names of the popular Micropayment Systems

• IBM Micro Payments
• iPIN
• Millicent
• NetBill
• Flattr
• Jamatto
• M-Coin
• PayPal
• Swish
• Blende

Conclusion

There is no doubt about the fact that the system of micropayment is going to be a revolutionary method which will be used by many different companies to extend services and provide payments to those who are in need for it.

So, for those who are fascinated with the concept, this article is going to provide all the information that they need.

Have you been using any micropayment systems? What is your favorite choice when it comes to making an online transaction of a small sum of money? Tell us in the comment section below.