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PayPal May Have a Big Solution for Micropayments

Posted on 8.13.2010

The micropayments space – while filled with promise for online businesses and consumers alike – has thus far generated more discussion than results. Friday’s announcement that PayPal intends to launch its own small-transaction payment product by the end of 2010 may change that very quickly.

Already, it is a crowded and competitive arena. Numerous companies are developing solutions for making online transactions for small amounts of money a more viable option for merchants and shoppers. As it is today, most online businesses don’t generate enough profits from such sales to expose themselves to transaction fees from third-party payment systems. Consumers, while increasingly warming to small-scale Internet purchases, are still somewhat reluctant to go through the required steps for items of $10 or less.

But with these low-ticket items becoming an increasingly important part of our online retail economy, the potential for micropayments is anything but small. A number of startups such as Flattr have developed innovative approaches, and Web leaders such as Google, Facebook and Visa have experimented with variations of their own. But, to date, no one has found a solution that completely satisfies both retailer and shopper.

While no specifics are yet known about the new product in development, PayPal vice president Scott Thompson says the company's goal is to make micropayments as seamless as possible for the buyer and the seller. If such a visible presence in the payments industry can find a solution for which others are still searching, micropayments could start to change the economy of the Web at an accelerated rate.

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