micropayments iom599 - october 30, 2000 allen cinzori dan salenger steve vincent raymond yee
TRANSCRIPT
Micropayments
IOM599 - October 30, 2000Allen CinzoriDan SalengerSteve VincentRaymond Yee
Micropayments Agenda
• The Evolution of Transactions
• Customer Model
• Benefits Provided by the Internet
• Technology Overview
• Current Micropayment Providers
• Conclusions
The Evolution of Transactions
• Barter
• Currency
• Credit
• Micropayments
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
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
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
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
Micropayment Customers
Consumers
Strategic Partners
Merchants
Strategic Partners
• Billing Access to Consumers
– ISP
– Utility Companies
– Phone / Cable Operators
• Potential source of investment funds
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
Consumers
• Micropayments provide potential benefits
– Ease of use (one click shopping)
– Anonymity
– Security
Benefits via the Internet
• Improved Security
– Absolute security is unchanged
– Relative Security is greatly improved
• Universal Acceptance
– Language independent
– Currency independent
More Benefits via the Internet
• Reduced Transaction Cost
– improved security reduces cost of fraud
– Overhead services reduced
– Network infrastructure established
• Anonymous Payments
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
$ $
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
$
$
Public Key Architecture
Positives• Greater personal
security than CSA
Negatives• Consumer hardware• Setup complexity• Sacrifice anonymity
Service Provider
Consumer
Merchant
Consumer Merchant
Service Provider
$ $
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”
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
iPin
• Central server architecture
• Multiple payment channels– Phone, ISP, cell phone
• Product launch in Fall 2000– Current testing w/ AT&T WorldNet
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
Qpass
• Creates complete commerce infrastructure– PC’s, PDA’s, cell phones
• Payment channel– Credit
• Expensive setup cost
• Unique pricing structure
• Well respected client list
And the Winner is...
• Highly fragmented market– No existing standard
• Unclear “winner”– But our guess is…
The Future
• New Technologies
• Emerging Standards
• Role of Industry Leaders
• Changing Consumer Sentiment
• Structural changes in digital information industries