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Foreign Exchange

Review of developments in payment systems 2010: Online micropayments

One of the major benefits of the internet is that its content, for the most part, is free. But this can be a major problem for companies not generating enough revenue to continue to give away information, which include not only newspapers and publishers but also pharmaceutical and other companies needing to charge for the advice they offer on their websites if they are to continue to provide the service. A cost-effective way of collecting low value payments of $1 or less on the internet is urgently required.

There are several problems with these so-called micro-payments. The cost of clearing and settling a payment never really falls below 20 cents, which is far too high for a payment of $1 or less. The overhead of registering a subscriber is too costly and, in some ways most important, every purchase requires a mental decision as to whether or not it is worth the price. Subscriptions work in a limited number of cases, but Rupert Murdoch’s dream of making occasional readers pay for access to the content on News Corporation web sites is proving difficult to convert into reality. Aggregating payments over a period of time or until the total value reaches or exceeds a specified amount, as Apple does with the 100 million-plus registered subscribers to its iTunes service providing music, videos, TV programmes and ‘apps’, many of which cost less than $1 each, works well but the user has to be registered, including full payment card details.

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