How Micropayments Work
Pay-as-you-go: This strategy simply charges a small one-time payment to a customer's credit or debit card for each article, service, or virtual item.
Prepay: Prepay enables customers to make micropayments for products such as app downloads or on-demand movies by utilizing virtual currency stored on a gift card or in a digital wallet.
Post-pay: With post-pay, consumers pay after they’ve made a certain number of micropayments. Merchants keep track of a consumer’s transactions and then bill them all in a single amount.
Top Uses of Micropayment
In the case of digital app platforms like App Store and Google Play, users create an ID and store payment information within a digital wallet. Users can then make digital purchases like apps or content like music, books, or movies for small amounts like 99 cents.
Google Ads employs a strategy with content creators such as YouTubers. These authors monetize their material on a Google platform, earning money through ad views and clicks. Payment is made to the content producer after these micropayments reach a specified level, such as $100.
Other examples include streaming platforms like Spotify, Netflix, and cable TV companies.
While subscribers will usually pay an access fee, they can purchase single services through micropayments—like a cable TV subscriber purchasing a movie on demand through their TV provider for around $5.
Micropayments allow players to purchase virtual products available in-game. Purchasing virtual products is a win-win for both developers and players as developers may create more consistent sales by giving specific items and costumes and players can skip pricey expansion packs and pay just for what they need.
Top Micropayment Providers
PayPal
PayPal microPayments is a micropayment system that charges users' PayPal accounts for payments. It permits transactions of less than $1*. As of 2013, it is only available in certain currencies.
Flattr
Flattr is a micropayment (or, more precisely, a microdonation) system. Actual bank transactions and overhead costs are involved only on funds withdrawn from the recipient's accounts.
SatoshiPay
SatoshiPay is an online media micropayment platform. It allows websites to monetize content with a simple click or through automatic payments. Transaction quantities might be as little as $0.01 or even less (nano-payments) thanks to smart contracts and blockchain technology.
Swish
Swish is a micropayment system that operates in Sweden between bank accounts.
Since the country's use of cash has declined dramatically since 2010, it is now only utilized for minor transactions between persons and small companies that do not want to pay credit card reader charges. Half of Sweden's population is a registered user.
Related Terms
What is Cost-per-Click (CPC)? - Cost-per-Click (CPC) Definition
What is Pay per Click Ad (PPC)? - Pay per Click Ad (PPC) Definition
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