Micropayments
By Ricardo Szmit
14/11/1999
Overview
E-Commerce Today.

The Concept of Micropayments.

Micropayment Uses.

W3C’s Markup for Micropayments.

Electronic Wallet Systems.

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E-Commerce Today
Users buy concrete goods using credit
cards.

Examples: Books, CDs, toys.

Credit cards are not profitable for small
transactions (under U$ 10.00).

Credit card costs (in USA):


Merchant discount: 2%

Minimal fee: $0.25, $0.50 or more

Chargeback fee: $25.00
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Digital Products
Examples: News, Music, Pictures.

Digital products are provided through:

Free Content.

Subscription.

Advertising.

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Free Content
Build market share.

Increase brand awareness.

Encourage users to pay for more
complete products.

Problems:

No direct profit.

Used for lack of alternative.

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Subscription
Groups of products sold as unit.

Access allowed for period of time.

Problems:

High administration costs.

No impulse buying.

Shared passwords.

Consumers are hesitant to subscribe.

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Advertising
Banner ads.

Problems:

Annoyance for users.

Only viable for very popular sites.

Efficacy of ads is decreasing (1 in 200).

Small revenue per view.

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Requirements for New
Model
Allow users to pay small amounts.

Simplicity (single click).

Security.

Privacy.

Solution: Micropayments.

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What are Micropayments?
Very small payments made over the Web.

Transactions too small for credit cards.

Can be as little as a fraction of a cent.

Alternative to subscription and
advertising.

Can go in either direction.

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Scenario
The user clicks on a link requiring a
payment.

The browser looks for an "electronic
wallet", (a piece of software that acts a like
a rechargeable phone card).

The wallet makes a payment for
information downloaded.

The wallet keeps track of how much was
left, and how much has been spent.

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Micropayment Uses
Publishing

Marketing

Software

Entertainment

Web Services

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Publishing
Magazines, newspapers, books.

Micropayment allows selling:

Minisubscriptions (days, weeks).

Specific sections of papers.

Magazine articles and book chapters.

Single pictures, cartoons and songs.

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Marketing
Vendors can pay to consumers:

Coupons and incentive programs.

Paying for filling surveys.

Frequent user points.

Example: CyberGold.

http://www.cybergold.com
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Software
Developers can offer simple products:

Shareware and freeware.

Demo versions.

Upgrades and add-ons.

Java applets.

Source code for libraries.

Allow per-use payment.

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Entertainment
Micropayments motivate impulse
purchase.

Virtual casinos.

Online gaming:

Pay for game or for time.

Winners can be refunded.

Adult sites:

Preserve anonymity.

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Web Services
Public-specific services:

Virtual communities.

Content-specific search engines.

Brokers and meta-services.

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The Cost of Information
How would you know what a given piece
of information cost?

Links you have to pay for might be
marked in a different color.

The browser could show the cost as
you moved over the link.

Only when you click the payment is made,
and the information becomes available.

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Standard Payment
Information
We need a standard way to represent
payment information for following hypertext
links from Web pages.

The browser can interpret this information
to:


Show the cost of each link to the user.
Ask the wallet to make a payment.

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W3C Goals
Develop a common mark-up language for
payment information (standard way for
micropayment information to be encoded).

Develop an API (Applications
Programming Interface) to enable the
browser to talk to the wallet.

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Payment per Link
The payment information could include:

The price.

The currency.

The payment scheme.

How to get a wallet for a particular
payment scheme.

Information may be "public" or "private" to
particular payment schemes.

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The API
Provides a standard set of procedures to
allow the wallet and the browser to talk to
each other.

Is browser and payment scheme-neutral.

Allows different wallets to be selected for
performing some payment.

Allows users to download new wallets
dynamically.

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W3C Working Groups
The Micropayment Markup Working
Group:

Produced a specification for the
embedding of micropayment information
in Web pages.

The Micropayments API Working Group:

Is developing the API to transfer the
micropayment information defined in the
Web page to the wallet for processing.

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W3C Proposal
Common Markup for Micropayment Perfee-links.

Specification of fields to define payment
information (required and optional).

Alternatives for embedding fields in HTML
(using OBJECT, EMBED or APPLET
element).

Working draft: August 25, 1999.

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W3C Architecture
New module: Per Fee Link Handler
(PFLH).

Implemented as Plug-in or Java Applet.

PFLH processes the payment information
and communicates with electronic wallets.

PFLH functionality and communication
with wallets will be defined in other working
drafts.

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Required Fields
price: amount and currency.

textlink: textual description.

requesturl: product identification.

Payment systems: systems supported.

mpname: system name.

mpurl: system address.

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Optional Fields
imagelink: graphical description.

baseurl: absolute merchant URL.

merchantname: merchant designation.

duration: time for multiple retrievals.

expiration: end of offer.

Several others.

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Embedding Example
<EMBED src="http://www.w3.org/PFLHPlugin.exe”
baseurl="http://www.shop.com/biography"
merchantname="ShopAndPay”
requesturl="elvis.html"
textlink="Buy the biography of Elvis"
price="+0.01USD"
1.mpname="micropayment"
1.mpurl="http://www.micropay.com"
2.mpname="millipayment"
2.mpurl="http://www.millipay.com”>
</EMBED>
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Electronic Wallets
The wallet might come pre-installed as
part of the browser.

You may be invited to download a new
wallet.

Wallet must be initialized, filling it with
cash or credit.

Browser may have several wallets.

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Wallet Functionality
The wallet initiates the payment.

May involve a third party payment
server.

Wallet are accessible outside the browser:

Check how much money is left.

Check where the money was spent.

Refill the wallet.

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Microsoft Passport Wallet
http://www.passport.com

Goal: The wallet store credit card
numbers and shipping addresses. It can fill
forms automatically, making it easier for
customers.

Today 70% of forms are abandoned.

Microsoft wallet does not store money,
and does not allow micropayments.

Uses ECML standard.

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ECML Standard
Electronic Commerce Modeling
Language.

http://www.ecml.org

Partners: Microsoft, IBM, Compaq, Sun,
VISA, MasterCard, American Express,
others...

Defines standard names for form fields.

Fields include: Credit card information,
billing and shipping addresses, etc.

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ECML Example
<FORM action="http://ecom.example.com" method="POST">
Please enter card information:
<p>Your name on the card
<INPUT type="text" name="Ecom_Payment_Card_Name” SIZE=40>
<br>The card number
<INPUT type="text" name="Ecom_Payment_Card_Number"
SIZE=19>
<br>Expiration date (MM YYYY)
<INPUT type="text" name="Ecom_Payment_Card_ExpDate_Month"
SIZE=2>
<INPUT type="text" name="Ecom_Payment_Card_ExpDate_Year"
SIZE=4>
<br>
<INPUT type="submit" value="submit"> <INPUT type="reset">
</FORM>
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Electronic Wallet Systems
Based on online connections:

CyberCoin (CyberCash).

Semi-online:

Digicash (E-cash).

Millicent (Compaq-Digital).

Stored-value:

Mondex (MasterCard).

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Cybercash
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Digicash
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Millicent
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Mondex
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Current Status
All veteran micropayment schemes failed.

First Virtual: Closed!

CyberCoin replaced by InstaBuy (MS
like).

DigiCash: Only 4 banks (Europe,
Australia).

Millicent: Started to work only in Japan.

Problem: Chicken and Egg.

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Chicken and Egg
Quoted from:
“So far, every attempt to create a new currency for
the Internet Economy has failed miserably. The
digital-cash business has been plagued by a
terrible
chicken-and-egg problem: Consumers won't buy
into new payment systems that aren't in common
use, and without mass consumer participation,
merchants will be indifferent at best.”
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New Schemes

OneClickCharge: Prepaid with credit card.


Qpass: Aggregated with credit card.


http://www.qpass.com/
Ipin: Charges to ISP bill.


http://www.1clickcharge.com/
http://www.ipin.com/
eCharge: Charges to phone bill.

Http://www.echarge.com
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The Israeli Scheme
Trivnet’s Wisp: Charges to ISP bill.

http://www.trivnet.com
International Sales and R&D Offices
PO Box 18
Shfayim 60990
Israel
Phone +972 (0)9 951-8221
Fax +972 (0)9 951-8223
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Future of Micropayments
Micropayments’ benefits are clear:

Increase revenue possibilities.

Motivate expansion of online content.

Allow user-specific digital products.

Current picture may be changed by:

Definition of standards (W3C).

Entrance of big players (MS).

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Reference Articles
“Cha Aims Big With Micropayments Service”,
ComputerWorld, July 1999
“Digital Cash Is Back”,
The Industry Standard, September 1999
“Micropayment Firms Seek New Ways to Cash In”,
The Industry Standard, May 1998
“Charging for Online Content”,
D-Lib Magazine, January 1998
“Micropayments on the World Wide Web”,
J. Martin Devine, December 1998
“The Millicent Microcommerce System”,
Compaq White Papers, 1998
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Reference Links

Micropayment schemes:

http://www.w3.org/ECommerce/Micropayments/

http://www.cybercash.com/

http://www.ecashtechnologies.com/

http://www.millicent.digital.com/

http://www.mondex.com/

http://www.hrl.il.ibm.com/mpay/

Micropayment pictures from:
http://newmedia.com/NewMedia/97/08/fea/money.html

Presentation template from:
Ahttp://www.presentersonline.com/
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