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“Micropayments” (that is, payments under $12 or so) are big business on the Web, for both solo-preneurs and giant corporations. Small business owners can accept micropayments the same way they take any payments oneline but the fees on micropayments can be killer if your customers pay online with a regular credit card, with their Paypal account, or Google checkout or similar services.
Just as there are a lot of different ways to accept credit cards for your small business, there are many ways to save money on smaller payments, and a lot of services competing for your micropayment transaction dollars.
Now Paypal has thrown its hat into the virtual ring to begin accepting micropayments for US customers, as well as other Paypal merchants across the world, including transactions within Australia, the UK and across Europe. Unfortunately, payments cannot be made or accepted across any country borders, only within the given regions. The service fees, while lower than Paypal’s fees for regular payments, are comparable to other micropayment services out there.
The transaction rate is 5% + .05 cents per transaction, v. s 2.9% + $0.30 for regular transactions.
The big benefit to using Paypal for micropayments is the company’s reputation — rightfully so or not, most Internet buyers comfortably use Paypal for their transactions without concerns of security, since their bank account or credit card information is never revealed to the seller. Also, Paypal holds the greater market share for online transactions (after credit cards), meaning more people use it than Google Checkout, Moneybookers, or other online money transfer websites.
There is a slight catch, or complication, if you will, to this new service offered by Paypal. Merchants who want to accept micropayments through Paypal at the new, lower micropayment rate must open a separate account for micropayments, because each Paypal account is associated with only one merchant processing rate. That means directing the funds you receive into a different bank account (since each bank account can only be associated with one Paypal account). Your regular payments will go into your regular Paypal account, and your micropayments will go into an account set up specifically for micropayments at the new, lower service rate.
This can also create hassles for Web designers (or small business owners who set up their own e-commerce website) because you’ll need to log in to your two different accounts when you set up “Buy” buttons, depending on the price of each product on your site. If you have a shopping cart system, I don’t see any clear way to divide purchases under $12 from purchases over $12. (Then again, I’m not a Webmaster, so there might be a way.)
If you have a website set up to sell a single products, such as an eBook, at a low price point (for instance, $9.99), and you have a second bank account to establish a second Paypal account, this service could save you a lot of money in fees over time.
Another benefit is that a micropayments account lets users process payments in just two clicks — without having to be directed to the Paypal site to login, etc. This truly keeps the “impulse” in Internet impulse purchases.
It’s worth noting that Facebook, king of the micropayments with all their fee-based apps and games, will integrate with Paypal’s new micropayment platform. According to BusinessInsider.com, the U.S. market for virtual goods may exceed $1.5 billion in 2010.
Clearly, micropayments are a lucrative business that require a well-known, secure payment solution.
To consumers, the benefits to Paypal’s new microprocessing are fairly obvious:
- Two-click payment processing for those impulse buys, so you can get on with your game
- A secure platform from a trusted name in e-commerce
- Sellers may pass the savings in fees on to you — or at least not increase prices (Hey, we can dream, can’t we?