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The Almighty Buck Businesses

PayPal to Offer Micropayments 299

Posted by CmdrTaco from the only-a-matter-of-time dept.
lazarus corporation writes "According to a press release on shareholder.com, PayPal are introducing micropayments processing fees for digital goods. Will this allow musicians to do away with record companies completely and successfully sell their own music online?" It looks geared to be the under $2 area and not the couple of pennies area, so I think calling it "Micropayments" is a bit much, but it's something. Still amazing that in 2005 nobody has figured out a way to make it simple to charge a penny on-line.
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PayPal to Offer Micropayments More

PayPal to Offer Micropayments

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  • Transaction Costs (Score:5, Insightful)

    by Oculus Habent ( 562837 ) * <oculus.habent@g m a il.com> on Tuesday September 06, 2005 @07:37AM (#13488961) Journal
    Still amazing that in 2005 nobody has figured out a way to make it simple to charge a penny on-line.

    The cost is in the partnering. Even if you can get the user to put in money in large blocks that don't kill you in financial transaction fees ($20+ is my guess) instead of being charged a few cents a day/week, you have the transaction overhead of whatever unique system each site uses (per page, per article, per section, per day, any of these with caps...), subtracting the fees from each user, aggregating the total payment to each site and providing statements to all.

    The key to the micropayment game is aggregation of volume . If your company is processing 2000 payments per day of $0.01 each from 2000 different people, it's probably costing you more than it's worth. However, if you're processing five million payments a week with an average individual's cost being around $0.25, you might be breaking even. If you could get two dozen major sites and hundreds of smaller ones on board, you might make money.

    Either the financial costs (actually taking and distributing money) need to be reduced, or the number of transactions per person/site need to go way up. I don't see banks and credit card companies giving out money for cheaper, so, here's the hard question: How do you get widespread buy-in on a system that only works once it has widespread buy-in? Who's the philanthropist who will fund a losing game for as long as it takes to become profitable?

    Hey, maybe the government is interested! They own the money, anyway...

    • Re:Transaction Costs (Score:5, Interesting)

      by the_unknown_soldier ( 675161 ) on Tuesday September 06, 2005 @07:43AM (#13488993)
      But this is the beauty of pay pal. When paypal transfer money from one account to another the money is still just sitting in Pay Pal's account. So users Put in $20 for micropayments, it gets moved to 20 different accounts, and each of those accounts gets 20 micropayments. Apart from raw database management costs which are minimal, this is going to cost Pay Pal the same.

      • Re:Transaction Costs (Score:5, Informative)

        by Oculus Habent ( 562837 ) * <oculus.habent@g m a il.com> on Tuesday September 06, 2005 @07:54AM (#13489042) Journal
        How long do you think the sites will leave their money sitting on PayPal, though?

        I understand that PayPal's solution is quite different from Slashdot's solution; PayPal is banking on $0.50-$2.00 - type transactions and Slashdot is a penny a page. The latter style (CmdrTaco's comment) is what I was talking about.

        PayPal may be uniquely positioned to provide such a service, as they already provide some aspects of the needed technology.

        As Taco mentioned, though, the real test of "micropayments" is not under $2.00, but rather under $0.10. The markets are likely quite different though. This 5% plus 5 cents could work for a variety of small transactions.

        • Re:Transaction Costs (Score:3, Interesting)

          by MikeFM ( 12491 )
          I just let users buy credits (that can be used on any site supporting my system) and let users transfer credits from that pool. When they run out then they can't access any of the using sites without buying more credits. *shrugs* Seems easy enough. Usually sites charge about $.01/Kb. Dunno if I could make the system profitable for me as the service provider though. I thought about making it so credits could be used for other stuff though and providing free store/auction sites that only work with credits. Us

      • Re:Transaction Costs (Score:5, Insightful)

        by AviLazar ( 741826 ) on Tuesday September 06, 2005 @07:56AM (#13489060) Journal
        Let's not forget things as fee's. When you use your Credit card to pay PayPal there is a merchant charge. This charge varies but it can (easily) be around 1.25 + 1% of sales. This is paid by the merchant, not the client. So if you are buying something for 1 cent, even 25 cent's, the merchant is not only not making money, he is losing money!

        Now a company like PayPal probably has a pretty good system in place, where their credit card charge is less then mom-n-pop merchant - but they still have costs

        It's not that we can't do micropayments, it's just that it is not cost effective.
        • The problem is that paypal needed to pull their heads out of their arse years ago on this.

          if coke machines were paypal enabled and other vending, mc-donalds, etc they would have dominated the market almost overnight.

          they dropped the ball in their constant attempt to keep from being labelled as a bank. something that will catch up with them eventually.

          it blows my mind how fragmented the financial world is. nobody wants to play ball with anyone else and there is a giant "MINE MINE MINE" mentality going in

        • Re:Transaction Costs (Score:3, Insightful)

          by gfreeman ( 456642 )
          I think the point that was being made was that it should be insignificant to PayPal to move data around internally. The charges you mention will only be brought into play when cash is withdrawn from the merchants' accounts. Moving pennies from one account to another should be free, given that commissions are paid upon withdrawal.

          With credit cards, there's no "float" - all payments go in and are paid back to the merchant minus commissions. (I am assuming that's true, please correct me if you know different).

          • Re:Transaction Costs (Score:3, Insightful)

            by AviLazar ( 741826 )
            Floats almost always happen (with the exception of Wire Transfers, which usually cost 10-50$/transfer). Also, if the merchant doesn't settle their credit machine at the end of the night this delays the transaction (in this case floating to the advantage of the customer). I doubt a place like PayPal, or even any online retailer who only accepts credit cards, would do this. It still takes time, however, and companies float. Some banks have deals with each other and they minimize floating periods, but it is

        • Re:Transaction Costs (Score:5, Informative)

          by CProgrammer98 ( 240351 ) on Tuesday September 06, 2005 @09:11AM (#13489500) Homepage
          You have been especially selected for our FREE Apostrophe 101 [fsnet.co.uk] course.

          We recommend that you pay particular attention to module 3...

          It's "fees", not "fee's" and "cents" not "cent's". Although you managed to work out how to pluralise "thing", "sale" and "cost" and even "micropayment" correctly.

          4 out of 6 plurals correct... Well done, but do try harder next time... :)

        • Re:Transaction Costs (Score:2, Funny)

          by Anonymous Coward
          Someone please take that man's apostrophe key away!
      • Each person transfers in large chunks of money, and then paypal only needs add money to one account and subtract it from another. They'll probably use simplified record keeping on the micropayments, and set a limit of the total amount you can send each month.

        (dealing with money, they're going to have to keep good records, for legal reasons but they can probably get away with letting people spend $20-$50 a month would be OK. Who's going to sue them for $50?)

        Then, paypal will seize the all the money fo
      • I live in the Bahamas and want paypal but we can't get it here. Global markets indeed.

        all the best,

        drew
        --
        http://www.ourmedia.org/node/44851 [ourmedia.org]
    • 'Who's the philanthropist who will fund a losing game for as long as it takes to become profitable?'

      Those people are called 'investors', not 'philanthropists'. And there are lots of them around.

      Otherwise, I agree with you completely. I just wanted to correct that one point.

      • I almost used the term venture capitalists, but thought better (worse?) of it. There's a very real possibility that the ROI for a project like this is long. One could be pouring money into this for years until you hit break even. It could work faster, if you could get widespread adoption, but there are no guarantees.

        It's as possible as not that you will run into a competitor in the field, and spend months - even years - fighting for supremacy or in talks for interoperability or buyout.

        This is an "infrastruc
    • Still amazing that in 2005 nobody has figured out a way to make it simple to charge a penny on-line.

      But they have: just do it. It's the bean-counters who are holding it back, insisting that the cost of processing the transaction be counted against the transaction, instead of as an overhead. How many businesses count the x" of Tally roll against each transaction?

      If your company is processing 2000 payments per day of $0.01 each from 2000 different people, it's probably costing you more than it's worth.

      Onl

    • I was just about to say "the government".

      You are a legitimate phenomenon!

  • My 2 cents... (Score:5, Interesting)

    by nmg196 ( 184961 ) * on Tuesday September 06, 2005 @07:39AM (#13488972)
    Why would you need to pay someone only 1 or 2 pence/cents? I can't think of anything this cheap that you would need to buy on the internet. Except perhaps a license to play a music track once or something...
    • Charge someone $.01 an hour to use a piece of software. That's an actual reasonable amount to charge for software for a change, and few(er) people would circumvent it. For a part time developer (with an actual full time job), a nice app with (only) 100,000 people using it just say, two hours a month would net you a handsom $2000 a month. Make a few others and you can quit your full time job (although that's not advisable..).

      I pick 100,000 people because that's between the number of people you'd get for a

    • Spam (Score:5, Interesting)

      by Ieshan ( 409693 ) <ieshan@gmai[ ]om ['l.c' in gap]> on Tuesday September 06, 2005 @08:11AM (#13489123) Homepage Journal
      Suppose you required along with your email that people first deposited a .001 cent micropayment to your email provider, or else their email would be bounced. This cash would be deposited in your "email account", and you could use it to send .001 cents to other people. So, if you emailed back and forth between two friends, your net loss would be zero (B sends .001 to person A, person A sends .001 back to B).

      Now consider spam. If spammers had to pay .001 cents for every email, and they send out hundreds of thousands of day, that's 100s of dollars wasted on micropayments. Up the micropayment to .01 cent, and the mass emails to a million a day (not unheard of), and you're dealing with tens of thousands of dollars in spam overhead. That's a lot, and not easy to recoup by selling product. It makes spamming unfeasible.

      The idea is a little like putting re-usable postage stamps on your email. Instead of paying a tax, you're paying an assurity that you've enclosed a totally insignificant monetary sum along with your email.

      People would probably be able to whitelist certain accounts, so that they could recieve mass mails from the University, and from Sport Teams, and from their family. But ideally, it wouldn't matter, becuase the payments would be so small, it would only affect those doing craaaaazy amounts of mass mailing.
      • Of course, that should be .001 dollars, .01 dollars, etc.

      • Re:Spam (Score:4, Insightful)

        by Tony Hoyle ( 11698 ) <tmh@nodomain.org> on Tuesday September 06, 2005 @08:26AM (#13489189) Homepage
        Been tried.. wouldn't work.

        1. Who would collect these payments? You really think a spammer in korea would pay them? The ISP? I don't use my ISPs mail system (neither do spammers, btw.)
        2. Mailing lists... LKML would go bankcrupt in about a day.
        • 2. Mailing lists... LKML would go bankcrupt in about a day.

          When he wrote "People would probably be able to whitelist certain accounts, so that they could recieve mass mails from the University, and from Sport Teams, and from their family", I doubt that he meant that this could only apply to Universities, Sport Teams, and families.

        • Re:Spam (Score:3, Insightful)

          by Sancho ( 17056 )
          1. PayPal, or whatever micro-money-management service everyone agrees to use. And I don't think a spammer in Korea would pay them either, but they'd be blacklisted if they didn't.

          2. This would almost have to start out on the client with un-paid e-mails being either dumped in the bit-bucket or used as another factor in a Spamassassin-like filter. As more people began using it, it could theorhetically be an authentication on the server so that the bad mail is never delivered to the end user in the first pla

      • Re:Spam (Score:3, Insightful)

        by jim_v2000 ( 818799 )
        What about people who run their own mail servers?

    • Re:My 2 cents... (Score:2, Insightful)

      by gravos ( 912628 )
      There are TONS of things that paying a penny or two for would be really useful, and could make your online browsing experience much better.

      For instance, imagine paying a penny to read a webcomic on a site (like, say http://penny-arcade.com/ [penny-arcade.com]). It's a pittance to you, assuming all you have to do is click one button to make the payment. If 10,000 people pay one penny to read that comic, the author has made $100. This is a great way to support online content-based sites, and also to rid them of ads. Something
    • Right now, I have subscriptions to a couple of sites. They cost me about $60 per year, regardless of how much I use them. If, instead of a flat fee, I could pay a ten cents for a day of use ($30 = $0.11 if you use a site every weekday) or a cent or two per page view, I could still provide them revenue, but also have the cost be weighted to my use.

      It also provides the opportunity for me to spend a little money at other sites. If I could spend a nickel or dime at a site for use instead of a $30 yearly - or ev
    • The best use of micropayments would be to make people pay an actual 2 cents whenever they use that phrase.

  • 10% Charge (Score:5, Informative)

    by Anonymous Coward on Tuesday September 06, 2005 @07:39AM (#13488974)
    The new fees will enable merchants to process payments at a rate of 5 percent plus 5 cents per transaction.

    So for $0.99 it will still take a 10% fee.

    Bastards.
    • and for $0.05 it will take a 105% fee. Bastards.

    • Re:10% Charge (Score:2, Informative)

      by qwp ( 694253 )
      yes, but you have to look at the system as of now.
      Right now you pay 30 cents plus a % of the sale.

      I run a dollar/month hosting company, and 35% of every monthly sale goes to paypal. Which the way I setup the system, is just the hit I take. I've accepted that because the hosting company isn't setup to make gobs of money, it's just ment to support designers and provide a better service. With this new micropayment structure I could earn 25% more each month, without doing a single change.

      Yes it is still evil, b

  • God forbid.... (Score:4, Interesting)

    by xao gypsie ( 641755 ) on Tuesday September 06, 2005 @07:40AM (#13488977)
    ....that the artists themselves would have the ability to sell and market their own music without big companies trying to get their piece of the pie. I am all for anything that returns music to an art-form rather than a business model.

    • Re:God forbid.... (Score:5, Insightful)

      by ScentCone ( 795499 ) on Tuesday September 06, 2005 @07:52AM (#13489034)
      God forbid ... that the artists themselves would have the ability to sell and market their own music without big companies trying to get their piece of the pie.

      It's not entirely clear what you mean, but I'm assuming you're refering to a company like PayPal "getting a piece of the pie" by facilitating those transactions of a buck or two. What's your notion, instead? That the musicians re-invent micropayments themselves, establish the infrastructure, the banking connections, etc., thus cutting out "the man," and then having no time to ever write or record another lick of music?

      We're a civilization of specialists. Most musicians don't grow all of their own food, either, and instead allow other people to get a "piece" of their food money. Someone else gets a piece of the pie when the band replaces the brake pads on their van, too. Making it easier for artists to handle small transactions is making it better for the artists, but it isn't better for anyone if the people building systems like that have no expectation of making a living off of their own efforts and investments themselves.

      Certainly artists that don't find this sort of tool useful can just... not use it! If tip jars at bars and coffee houses are more their speed, then that's always an option, too.

    • Re:God forbid.... (Score:3, Insightful)

      by Lumpy ( 12016 )
      Musicians already do have this ability.

      it's called a live concert. musicians have been doing this for 90,000,000 years. they can sell admission without giving "the man" a cut of the pie.

      Hell I see musicians doing this on street corners in large cities.... Ok calling some of them "musicians" is a bit of a stretch.

      There are thousands of ways for you to get paid without paying fees, taxes, extortion payments. unfurtulately all of them require you to be able to physically touch the person buying from you.

      a

  • Wrong problem (Score:3, Funny)

    by vettemph ( 540399 ) on Tuesday September 06, 2005 @07:40AM (#13488978)
    Maybe noboby wants to sell anything for a penny.

    • More than that (Score:5, Insightful)

      by JavaRob ( 28971 ) on Tuesday September 06, 2005 @10:11AM (#13489942) Homepage Journal
      I think nobody wants to BUY anything for a penny, either. Or -- they don't want to make hundreds of tiny purchases. No matter how easy it is. All micropayments do is *discourage* you from using a service more -- because every little thing you do will cost you money.

      Think about it -- what do we have in the real world that works in micropayments? The closest thing I can think of is phone service (where each minute of long distance costs you 7 cents, or whatever).

      And most phone companies are trying to AVOID the metered usage model, because people don't like that realization that as they're talking, that money is draining slowly out of their pocket. So - unlimited local calls, free nights and weekends, etc. etc.. The more you talk the more value for your money you get... so this kind of plan gets people in the habit of using the phone for long stretches of time. Then they're willing to pay more (since they feel like they're getting more!), and the usage habits transfer to the standard metered hours.

      But now think about a nascent online service. What's bad for a basic, necessary service like phone is HORRIBLE for brand-new, NON-commodity service. An online service needs to do everything it can to encourage you to use it more, to use it all the time, to incorporate it into your life. That's where the money will eventually come from -- people who feel they're getting a lot of value out of it. Nickel-and-diming you to death (and anything that gives you that feeling -- no matter how cheap it is in the end) is the exact opposite of what they need to do.

      I haven't thought this through far enough to figure out the ideal alternative -- maybe cheap year-long (unlimited) subscriptions to networks of sites? -- but I feel like micropayments will always give me a bad feeling.

  • Stuff that matters? (Score:5, Insightful)

    by EvilCabbage ( 589836 ) on Tuesday September 06, 2005 @07:40AM (#13488980) Homepage
    Screw Paypal. Seriously. I've quit dealing with anybody only accepting Paypal as payment methods, I've voiced my dissent (in a calm fashion) over their continued poor service and especially after the recent charity "issues", I'd urge other people to do the same.

    • Re:Stuff that matters? (Score:5, Insightful)

      by Tom ( 822 ) on Tuesday September 06, 2005 @08:07AM (#13489108) Homepage Journal
      Name an alternative.

      My online game accepts donations. I've looked very hard two years ago when I added that feature, and I found a total of two services I could use (PayPal and Moneybookers). Everyone else asks either for a ridiculous set-up fee or is otherwise unsuited for small businesses, donations, etc.

      I started offering both. In 18 months, a grand total of $10 was sent through Moneybookers, compared to a few thousand through Paypal. Guess which one I dropped.
      • "Name an alternative."

        Why? I'm happy just not dealing with them at all. If it means I 'miss out' on some crap I didn't need in the first place, so be it.
      • The good news is that some banks are making it easy to send money to individuals. You can cut PayPal out of the loop entirely. Example:

        US Bank [usbank.com]

        Check them out. Might be worthwhile to consider for your online game as well.
      • Why on earth did you drop moneybookers? It didn't exactly cost you very much to publish an email adress did it? Ten dollars may not be very much, but what's the point of refusing them?

        The ONLY kind of online payment system I have used (short of credit cards over SSL) is moneybookers, and I won't use anything else for that scale of payments unless they go out of business.

      • http://www.regsoft.com/ [regsoft.com] . I'm sure there are many, many others, but this is one that a friend of mine uses for his shareware.

        I too refuse to do any business whatsoever if PayPal is involved. It astounds me how many times I've contacted people that think they need to go through PayPal and I would get no response if I offer to mail them a check. And this is for a donation, not a fixed payment.
      • What about Amazon.com? They offer the same service as PayPal, have a MUCH better reputation and at least as much name-recognition.
    • And yet you don't recommend any alternatives or even give any good reasons why PayPal is no good. I hope your "urging" of other people is typically done more effectively.

      In the mean time, there's plenty of people who are happy with PayPal's service.

      • Re:Stuff that matters? (Score:3, Informative)

        by jez9999 ( 618189 )
        Apparently you never heard from the thousands of people who Paypal has screwed over, an example of which was illustrated by this [slashdot.org] recent story. I never use Paypal anymore, and haven't for many years. I'm still alive.

  • Bitpass has had micropayments for a long time (Score:5, Informative)

    by RhettR ( 632157 ) on Tuesday September 06, 2005 @07:41AM (#13488983)
    BitPass [bitpass.com] has had micropayments for some time... the catch is you have to buy at least $3 credits, but then you can pay those anonymously to websites in increments as small as one cent.

  • Microposts (Score:5, Funny)

    by Anonymous Coward on Tuesday September 06, 2005 @07:43AM (#13488991)
    In related news:
    Slashdot to introduce microposts, the offers seems geared toward the anonymous cowards posting under the 2 lines area...

  • Easy joke missed... (Score:4, Funny)

    by MosesJones ( 55544 ) on Tuesday September 06, 2005 @07:44AM (#13488997) Homepage
    charge a penny on-line

    The phrase is SPEND a penny

    I can't believe that Slashdot editors missed such a simple and infantile joke opportunity.

    Are standards improving or slipping?

  • Millipayments (Score:5, Funny)

    by kriegsman ( 55737 ) on Tuesday September 06, 2005 @07:44AM (#13489000) Homepage
    If micropayments are for just a few cents, shouldn't transactions in the $10-$90 range be called millipayments?

    -Mark

  • Paypal seizes $27K of Hurricance Katrina Red Cross (Score:5, Informative)

    by Anonymous Coward on Tuesday September 06, 2005 @07:46AM (#13489007)
    Paypal just siezed $27,000 of aid going to the Red Cross from SomethingAwful.com users - I'd say thats reason enough to cancel if you haven't already been royally screwed by them...

  • Ask gas stations. (Score:4, Funny)

    by mshiltonj ( 220311 ) <mshiltonj AT gmail DOT com> on Tuesday September 06, 2005 @07:47AM (#13489012) Homepage Journal
    They've figured out how to charge me 3.29 + 9/10 for a gallon of gas. 9/10 of one cent is pretty micro.
    • Not only that, but they typically measure the amount of gasoline that you bought down to the thousandth of a gallon -- The "true" price of whatever you pumped should then be specified down to the millionth of a dollar, or ten-thousandth of a penny.

      To avoid rounding issues, if they're going to specify the price down to 1/1000 of a dollar, they'd have to have pumps with a granularity of ten gallons.
      • Mods are you crazy??? parent was obviously, "funny."

        Since someone obviously needs a math lesson,

        To a first order, the rounding goes like the least *number* of significant digits. If you're going to charge people down to the tenth of a penny, you'd better have the means of measuring a tenth of a penny worth of gasoline.
  • How many other /.'ers get the continual torrent of "your PayPal account is under review due to unusual activity - click here to restore full access" with the clicky being a phishing trap? I'm actually glad that I do NOT have a PayPal account (never did) since these are, of course, easily ignoreable, although they are getting better in terms of evading my spam filters and looking more authentic.

    The other "main" ones appear to be Amazon and eBay - but I have yet to get a Email saying my Slashdot account is

  • Penny-sized micropayments v. $-sized dispute costs (Score:5, Interesting)

    by G4from128k ( 686170 ) on Tuesday September 06, 2005 @07:52AM (#13489036)
    The core challenge for small micropayments is the high cost of dealing with disputes. The cost to the company of a single dispute can be $5 to $50 depending on how much communication and labor is required to resolve a disputed transaction. If the transaction service is only charging a penny, then it only takes disputed charges in 1 in 5000 to 1 in 500 transactions to totally consume all the revenues - leaving no money for the actual service (software, hardware, marketing, etc.) in the other 99.9% of the transactions. Even if the cost of the technology were zero, these "real people" costs would make micropayments prohibitive.

    Paypal tries to avoid these high cost by making it very hard to contact a "real" person. Real people just cost too much. Of course, Paypal's alleged reputation for poor customer service (see paypalsucks.com) is the side effect of trying to keep costs down to enable low-dollar transactions.

    Perhaps when someone creates a competent AI for customer service, micropayments could work. Given that most companies still have trouble getting competent people for customer service, I'm not hopeful.

    • Overblown (Score:2, Insightful)

      by Jeff Molby ( 906283 )

      Micropayments have significant challenges, but I don't think this is one of them. It's every bit as expensive for me to dispute few pennies as it is for them to resolve the dispute. I've been known to throw away pennies when cleaning because I didn't care enough to find a jar.

      Certainly, I would file a dispute if a pattern of overcharges arose, but I doubt I would even take the time to go over my statement unless it amounted to more than $5/month.

      Are there really people here that value their time at a cou

      • Are there really people here that value their time at a couple pennies per minute?

        Just curious, how much do you get paid to read Slashdot? Does your boss know that's what he's paying you to do?

        Seriously, some people view complaining as entertainment. It's entertaining for them (okay, I admit it, for us), but not so entertaining for the company.

  • Structural problems (Score:5, Insightful)

    by confusion ( 14388 ) on Tuesday September 06, 2005 @07:53AM (#13489039) Homepage
    There are some structural problems with micropayments that need to be overcome:

    - paypal sucks. Everytime I think I should give them a second chance, they bombard me with 10 more reasons I need to stay away. They are like Best Buy in that regard.

    - Charge/merchant processing is still horribly expensive, to the point of making this unattainable. Long ago I had thought that paypal was going to smash the deathgrip that charge processors had on the world, but that has not come to pass, as they likely are also a victim of the charge processors.

    If I spend $.50 per month on digital media, and even if charges are batched monthly AND they get a super deal on charge processing costs, they will likely end up with

  • Good deal for PayPal, but not for you (Score:5, Interesting)

    by miniver ( 1839 ) on Tuesday September 06, 2005 @07:59AM (#13489072) Homepage
    "The new fees will enable merchants to process payments at a rate of 5 percent plus 5 cents per transaction."
    • $0.20 transaction -> $0.06 = 30.0% for PayPal
    • $0.40 transaction -> $0.07 = 17.5% for PayPal
    • $0.60 transaction -> $0.08 = 13.3% for PayPal
    • $0.80 transaction -> $0.09 = 11.25% for PayPal
    • $1.00 transaction -> $0.10 = 10.0% for PayPal
    • $1.20 transaction -> $0.11 = 9.16% for PayPal
    • $1.40 transaction -> $0.12 = 8.57% for PayPal
    • $1.60 transaction -> $0.13 = 8.13% for PayPal
    • $1.80 transaction -> $0.14 = 7.78% for PayPal
    • $2.00 transaction -> $0.15 = 7.5% for PayPal

    Not a bad deal for PayPal, but not a good deal for anyone else.

  • Micropayments aren't new (Score:5, Informative)

    by Alioth ( 221270 ) <no@spam> on Tuesday September 06, 2005 @08:01AM (#13489082) Journal
    Still amazing that in 2005 nobody has figured out a way to make it simple to charge a penny on-line.

    Micropayments were available in the mid to late 1980s on Prestel and Micronet (a British pre-world wide web online service). "Information providers" on Prestel/Micronet could have free pages, or pages that cost money to view from 1 penny and up. In 1986, I was buying and downloading games for my Sinclair Spectrum for a reasonable discount over going to the shop and buying the same game on tape. Multi-user games such as Shades were paid for using micropayments (1 penny increments). You could rent Gallery pages (a bit like making your own home page on the web today) by using this system.

    Of course with Prestel/Micronet it was easy since Prestel just added the charges to your bill quarterly. However, there's no reason why PayPal couldn't have done the same for PayPal user to PayPal user transactions since they wouldn't have to interact with any banking institutions to do it, so really it's boo on PayPal for taking so long to actually make this happen.

  • Paypal scares me now. Too many people depent on it as their sole way to receive payments. I mean, as long as they're the ones getting jacked with the high fees, that's fine with me.

    The thing about Paypal is that its buyer protection is rediculous. I've recently sold something to a guy in Europe and sent it with USPS. A few weeks later he disputes saying that he never received the item. Then I look at his eBay feedback and realize that I just got screwed. There is nothing I can do. So now I have to refuse

    • This protection is exactly what is needed to protect the internet as a viable channel for doing business with consumers, and a good thing.

      It's too bad you got screwed, but as a merchant, you are able to factor in the costs of either taking and doing the research.

      It's common for merchants to complain about the costs of customer service. They tend to only view the internet as a convenient (low cost) channel to present their merchandise, and to pass the risks to the consumers.

  • That's nice (Score:3, Insightful)

    by Dan East ( 318230 ) on Tuesday September 06, 2005 @08:04AM (#13489098) Journal
    I'm a developer that has used PayPal to receive monies for the sale of thousands of copies of my software over the past several years. So I am one of those that doesn't perceive PayPal as evil, as they have never screwed me over personally.

    However, as nice as it is that PayPal is going to make this happen, it really needs to be implemented within the actual banking system. I guess things are still too antiquated in some banking circles to reduce the transaction overhead enough to allow micropayments. However since their communication is already 100% digital, one would think they could make this happen if only they really wanted too. I guess too much human interaction is still involved, and it would be very difficult to track down theft when instead of a few hundred dollar transactions, someone has to look at several thousand 5 cent transactions.

    Also, when micropayments become commonplace, I expect phishing to grow immensely. If something only costs, say, a quarter, then a person would be more likely to pay because the risk is so low (I can see the spam subjects now: "Download top-40 songs for only 25 cents each!"). And thus it follows that when the consumer is fleeced, they will not be as likely to pursue the issue to get their money back. My daughter lost a quarter in the vending machine last week, and it simply wasn't worth the effort on my part to hunt someone down to try and get a refund.

    Also, can you imaging trying to contact the FBI to report an interstate theft of this kind?

    "How much of your money did they take, sir?"
    "25 cents"
    "Did you know I get paid $20 an hour, and you have already used up $2 of my employers time just talking to me?"
    "No, I didn't"
    "[click] [sound of dialtone]"

    Dan East
    • "Did you know I get paid $20 an hour, and you have already used up $2 of my employers time just talking to me?"

      Actually, that is the big reason why you can't get rid of "stupid" class action lawsuits. What is to prevent a company from stealing 10 cents from everyone in the country if no one person can reasonably fight it?

  • Already been done by... (Score:5, Informative)

    by OpenYourEyes ( 563714 ) on Tuesday September 06, 2005 @08:10AM (#13489120)
    About... oh... six or eight years ago, there was a company that was founded which had a great online payment scheme that would handle micropayments without problems. Instead of charging a per-transaction fee, it would make money on the float of withdrawing a larger sum from your bank account, not giving you interest on that ammount, and letting you tap into it whenever. Putting money back in your account that was transferred to you could take a couple of days, since they wanted to earn the float money. The company even had a way to do micropayments by beaming data from PDA to PDA, and were planning on a cell-phone version of the same thing. Eventually, they abandoned this system, abandoned the PDA and cell phone systems, and just about abandoned their customers. They switched to a transaction fee system, got bought by a bank, focused on auction transactions, and eventually were bought by eBay. This company was called PayPal.

  • scam.. expensive.. what else comes to mind? (Score:4, Insightful)

    by Exter-C ( 310390 ) on Tuesday September 06, 2005 @08:16AM (#13489148) Homepage
    seems overly expensive for "micropayments"..

  • Paypal == Evil (Score:3, Informative)

    by 1s44c ( 552956 ) on Tuesday September 06, 2005 @08:25AM (#13489184)
    Sooner or later paypal shaft everyone they deal with. They are the SCO of the banking world.

    They freeze funds and keep the money whenever they feel like it, they take random amounts out of peoples credit cards whenever they feel like it, and they send a pack of lies to their debt collection agencies about their own customers whenever they feel like it.

    Warning from real life experience, DON'T DEAL WITH PAYPAL!!

  • Should I welcome or fear micropayments? (Score:3, Interesting)

    by rolfwind ( 528248 ) on Tuesday September 06, 2005 @08:28AM (#13489199)
    Hm... when it comes to when micropayments online - say a penny per transaction - should I welcome or fear this development?

    How many free services/sites will start charging cash to use their services (a penny per page view) that will seem cheap at first view (it's only a penny!) but will start nibbling away at your wallet over time.

    Just a stray thought.

  • Is this NEW? (Score:3, Informative)

    by dpbsmith ( 263124 ) on Tuesday September 06, 2005 @08:29AM (#13489214) Homepage
    I haven't followed all the various changes in PayPal's offering, but when it was originally introduced, one of the scenarios they explicitly mentioned in their FAQ was one in which you sent a nickel to each of a hundred friends.

    When you sent the nickel, they would hit your credit card for $5, your friend would get a nickel "in" their PayPal account, and you'd end up with $4.95 "in" your PayPal account. The next 99 nickels would all come out of your PayPal account.

    Haven't you been able to do this all along?

  • This has been done by peppercoin (Score:3, Informative)

    by FuzzyDaddy ( 584528 ) on Tuesday September 06, 2005 @08:29AM (#13489217) Journal
    Peppercoin has already worked out a way to cheaply (i.e. transaction costs are much less than 1 cent)and securely do micropayments. [peppercoin.com]
  • Why don't they allow us to set up accounts that take in money for charities, without charge? I mean, I have a website with over 8000 users, and I wanted to start a drive to collect money for the hurricane relief to donate to the Red Cross, but if I set up an account using PayPal, they'd charge me a bunch of money, taking away from what we would want to donate. I only wanted to have it set up for my site to show that my small community of members can make a difference, but unfortunately I ended up putting a
    • I mean, I have a website with over 8000 users, and I wanted to start a drive to collect money for the hurricane relief to donate to the Red Cross, but if I set up an account using PayPal, they'd charge me a bunch of money, taking away from what we would want to donate.

      Yeah, or they'd block your account [slashdot.org] altogether.

      -FL

  • Back in 2001 I signed up for a long distance provider online and got 3 cents a minute for all calls on my LAN phone. I rarely use it for LD (use my cell), so 4 1/2 years later, I've accumulated $3.11 of long distance phone calls - the provider won't run my credit card until I reach 5 bucks of charges.

    Each month I get online (no paper) bill from them telling me I'm going to get billed some day.

  • Still amazing that in 2005 nobody has figured out a way to make it simple to charge a penny on-line.

    The problem is not an inability to ship pennies. The problem is that users don't want micropayments and they never will. [openp2p.com] (Where 'micro' is in the penny/nickel/dime neighborhood.)

    "...micropayments create a double-standard. One cannot tell users that they need to place a monetary value on something while also suggesting that the fee charged is functionally zero. This creates confusion - if the message to the us
  • It's already fairly obvious why "penny" micropayments haven't been embraced by consumers (inconvenience, privacy, annoyance factor) as well as why they're unattractive to transaction service providers (costs of disputes, etc.).

    Much rarer are discussions of the topic from the content-creator's (artist/writer/cartoonist/musician/poet/whatever) point of view. Minimum wage is roughly $5/hour in the US and $10 in the UK. You'd need 500-1000 visitors paying a penny EACH HOUR just to equal the princely sum yo

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