micropayments
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Micropayments. IOM599 - October 30, 2000 Allen Cinzori Dan Salenger Steve Vincent Raymond Yee. Micropayments Agenda. The Evolution of Transactions Customer Model Benefits Provided by the Internet Technology Overview Current Micropayment Providers Conclusions. - PowerPoint PPT PresentationTRANSCRIPT
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Micropayments
IOM599 - October 30, 2000Allen CinzoriDan SalengerSteve VincentRaymond Yee
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Micropayments Agenda
• The Evolution of Transactions
• Customer Model
• Benefits Provided by the Internet
• Technology Overview
• Current Micropayment Providers
• Conclusions
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The Evolution of Transactions
• Barter
• Currency
• Credit
• Micropayments
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What is a Micropayment?
• Very small transactions
– defined as under a few dollars
– potentially a percentage of a cent
• Immediate transaction processing
• Distinct from national currency
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Why is there a need for Micropayments?
• Currency use requires transfer costs
– Physical transfer costs
– Processing transfer costs - credit card
• Information can be a low price product
– No shipping required via the Internet
– Buy only what you need - Yield Management
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Substitutes to Micropayments
• Subscriptions
– All or nothing purchase decision
– Yield Management information lost
• Aggregation of Purchases
– Extended time until merchant is paid
– Consumers may only want one purchase
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Micropayment Market Potential
• Barriers to prior success
– Transaction volume
– Accessibility to inexpensive technology
• Business Wire projects huge growth
– $22.2 Billion in 2001
– $288.6 Billion in 2003
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Micropayment Customers
Consumers
Strategic Partners
Merchants
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Strategic Partners
• Billing Access to Consumers
– ISP
– Utility Companies
– Phone / Cable Operators
• Potential source of investment funds
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Merchants
• Information merchants have products to sell
– Stephen King
– Photographic stock houses
– Record Companies - secure form of MP3
• Pay-per-view model desired
• Credit card transactions are inefficient
• Customers under 18 don’t have credit cards
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Consumers
• Micropayments provide potential benefits
– Ease of use (one click shopping)
– Anonymity
– Security
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Benefits via the Internet
• Improved Security
– Absolute security is unchanged
– Relative Security is greatly improved
• Universal Acceptance
– Language independent
– Currency independent
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More Benefits via the Internet
• Reduced Transaction Cost
– improved security reduces cost of fraud
– Overhead services reduced
– Network infrastructure established
• Anonymous Payments
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Anonymous Architecture
Positives• Consumer privacy• Transactions can take
place off-line
Negatives• Merchants do not get
consumer information• Consumer hardware
Service Provider
Consumer
Merchant
Consumer Merchant
Service Provider
$ $
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Central Server Architecture
Positives• Similar to credit cards
(lower change barrier)• Lower transaction cost
Negatives• Single point of failure• Transactions require
Internet connection
Consumer
Merchant
Service Provider
$
$
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Public Key Architecture
Positives• Greater personal
security than CSA
Negatives• Consumer hardware• Setup complexity• Sacrifice anonymity
Service Provider
Consumer
Merchant
Consumer Merchant
Service Provider
$ $
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Micropayment Providers
• eCharge– “Eliminates fraud with a 100% guarantee”
• iPin– “The ubiquitous payment system for the global Web”
• MilliCent– “Simple to install”
• Qpass– “The most successful micropayment solution”
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eCharge
• Central server architecture
• Charges 2% to 8% plus $.10 to $.25
• Multiple payment channels– Phone, credit, prepay
• 14 merchants currently using product– MP3– McAfee.com
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iPin
• Central server architecture
• Multiple payment channels– Phone, ISP, cell phone
• Product launch in Fall 2000– Current testing w/ AT&T WorldNet
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MilliCent
• Public key architecture
• Allow purchase as low as 1/10th of a cent
• Multiple payment channels– Phone, credit, prepay, ISP
• Charges 13.25% to 14.5% per transaction
• Testing in Japan
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Qpass
• Creates complete commerce infrastructure– PC’s, PDA’s, cell phones
• Payment channel– Credit
• Expensive setup cost
• Unique pricing structure
• Well respected client list
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And the Winner is...
• Highly fragmented market– No existing standard
• Unclear “winner”– But our guess is…
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The Future
• New Technologies
• Emerging Standards
• Role of Industry Leaders
• Changing Consumer Sentiment
• Structural changes in digital information industries