Micro Payments 101
E-commerce today is a way of life. We go online and search for what we want, research it, find the best deal and buy. The process is usually as simple as going down to the local store and purchasing with your credit card except that you stand a better chance to make an informed decision about the product. The process of online purchase wasn’t always this way.
In the late 90’s the online transaction methods fell through due to the many errors while processing the transactions and quirky ways that each country handled the financial process. It was at this point that third party companies like PayPal started to emerge and offer to be the middleman in the financial transactions. Although difficult at first, these companies have slowly gained the trust of consumers and suppliers. The level of trust is reflected in the sheer volumes of transactions that take place daily on The Internet.
Micropayments are financial transactions that deal with very small amounts of money. Due to certain practical limitations, the current minimum transaction limits are around $12. This has more to do with processing costs than anything else. The ability to buy products for relative small costs has enabled the online economy to boom, a reason why companies like PayPal are constantly trying to bring down the minimum transaction amount. Another reason for the boom is the increased security employed by these middleman companies, which offers accountability and peace of mind to the consumer.
The internet has turned the world into one virtually localized market, where the physical location of the supplier and consumer has become irrelevant. Micropayments are one of the key factors that has enabled this growth of the global market.