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Understanding Micro Payments
A micropayment, sometimes called a microtransaction, is a very small online payment, usually under Rs.500. Micropayments are designed for purchasing low-cost digital goods like articles, songs, or other online content.
Micropayments allow people to pay small amounts for individual items instead of lump sums. With the rise of digital content and services online that can be purchased in small increments, micropayments have become a popular way to monetise websites and apps.
Instead of requiring a large one-time payment, micropayments allow people to pay small amounts for individual items or uses on a frequent basis.
What is a Micropayment?
A micropayment is a financial transaction involving a very small cost, such as paying Rs. 50 for a specific item or accessing a particular web page or app feature. Micropayments aimed to solve the problem of how to efficiently charge small fees online for individual purchases, subscriptions, or other monetised digital services where larger payments did not make sense.
How do Micropaymets Work?
There are a few key aspects of how micropayments function:
- Micropayments are processed through online payment gateways that facilitate micro-transactions.
- Users set up digital “wallets” that are funded with credit cards, bank accounts, or other payment methods. Their wallets hold the balance used to make micropayments.
- When a micropayment is initiated, a very small amount (such as less than Rs. 10) is deducted from the user’s wallet balance and transferred to the merchant.
- Purchase histories, wallet balances, and other payment data are securely managed by the payment gateway to facilitate ongoing microtransactions.
4 Types of Micro Payments
The following are the 4 types of micro-payments:
1. Prepay:
In the prepay model, the user deposits money into their account in advance, and the amount is deducted from their account for each transaction, such as recharging a prepaid mobile plan or depositing money in a prepaid debit or transit card. This ensures the transaction is covered but requires the user to estimate their usage in advance.
2. Post-Pay:
In a post-pay model, the transaction amount is recorded, and the user is billed periodically, usually monthly. This model is used, for example, for postpaid mobile plans or credit cards. It provides flexibility to the user as they don’t have to estimate usage, but the user runs the risk of bills getting unpaid if they exceed their spending limit. A late fee may also apply.
3. Collaborative:
In a collaborative model, multiple users pool their money into a shared account. Depending on user choices, this money is subsequently divided among content producers or small publishers. Small publishers profit from this strategy because it enables them to get paid by readers who value their work.
Each user can track the overall balance and transactions. This allows cost-sharing among friends and families for shared expenses like groceries, meals, etc., but it requires mutual trust among participants. It is compatible with many kinds of material and is standard across crowdfunding sites.
4. Pay-As-You-Go:
In the pay-as-you-go model, the user pays for a service or content only when it is consumed or accessed, similar to paying per use. For example, paying for each ride in a transportation service or paying per article read or song listened. It provides flexibility and control to the user for unplanned on-demand usage but may cost more than a fixed subscription if used frequently.
Secure Your Online Payments With NTT DATA Payment Services India
No matter the type of micropayment, securely processing these very small transactions presents unique challenges.
NTT DATA Payment Services India offers a complete payment solution to advance both your offline and online businesses. From online payment gateway and POS machines to IVR payments and Bharat QR Scan and Pay, we ensure maximum comfort, convenience, and safety for all your payments.
NTT DATA Payment Services India provides a full-featured payment platform designed to accept online and offline payments. specifically for micropayments and digital goods. The platform easily integrates into websites and apps to enable all four main types of micropayments.
Conclusion
As digital content and services continue to proliferate online, micropayments will remain an important monetisation strategy. By understanding the different types of micro-payments available, companies can choose the best approach to meet their business goals and maximise customer value. With the right technology, micropayments can open new opportunities for merchants while providing users with affordable, granular access online.
FAQ
1. What is a micropayment?
A micropayment is a very small online payment, usually under Rs. 500, used to purchase low-cost digital goods like articles, songs, or other online content.
2. What are the advantages of micropayments?
Micropayments allow people to pay small amounts for individual digital items instead of lump sums. This provides flexibility and makes monetising small digital goods viable.
3. How do micropayments work?
Micropayments are processed through online payment gateways. Users set up digital wallets funded via cards/bank accounts. Amounts are deducted from wallets for each microtransaction.
4. What are the 4 types of micro-payments?
The 4 types are Prepay, Post-pay, Collaborative and Pay-as-you-go models.
5. How can micropayments benefit online businesses?
Micropayments open new opportunities for merchants to monetise small digital goods while providing affordable access to users. This benefits both merchants and customers.
