August 13, 2010

PayPal Planning To Offer Micropayment Service

PayPal is making it easier for consumers to make micropayments in order to buy low-cost digital goods online.

Scott Thompson, PayPal's president, said Thursday that the online payment service plans to roll out a payment product by the end of the year that helps businesses collect "micropayments" on the Web.

Thompson said he believes consumers want to purchase items in small increments.

This service will work best for those purchases that are required to be bought in bulk.  For example, during online games, a user may need to purchase a 49-cent sword, but the game may require a $5 credit limit.  PayPal would take care of this by compiling the consumer's transactions with that game, and then bill them later.

PayPal is already involved in the digital payment market.  Two billion dollars of PayPal's $71 billion last year came from digital goods such as music, video and software downloads.  Thompson said the company processed $1.3 billion in digital goods payments in the first half of this year.

The company has already been offering merchants a micropayment option that websites can use, charging a fee of 5 percent plus 5 cents for small transactions.  A $3 micropayment for a news article would cost the merchant 20 cents. 

Thompson believes the upcoming payment product will make online purchases better.  For example, if a user is playing the popular online game "Farmville" and needs to make a purchase, the game could be interrupted in order to make that purchase.  He hopes to change this.

"The whole intent is to keep you in the experience, don't force you to do anything else ... and keep it economical for all parties," he said.


On the Net: