Micropayments

1
Micropayments

• By Ricardo Szmit
• 14/11/1999

2
Overview

• E-Commerce Today.
• The Concept of Micropayments.
• Micropayment Uses.
• W3Cs Markup for Micropayments.
• Electronic Wallet Systems.

3
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

4
Digital Products

• Examples News, Music, Pictures.
• Digital products are provided through
• Free Content.
• Subscription.
• Advertising.

5
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.

6
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.

7
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.

8
Requirements for New Model

• Allow users to pay small amounts.
• Simplicity (single click).
• Security.
• Privacy.
• Solution Micropayments.

9
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.

10
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.

11
Micropayment Uses

• Publishing
• Marketing
• Software
• Entertainment
• Web Services

12
Publishing

• Magazines, newspapers, books.
• Micropayment allows selling
• Minisubscriptions (days, weeks).
• Specific sections of papers.
• Magazine articles and book chapters.
• Single pictures, cartoons and songs.

13
Marketing

• Vendors can pay to consumers
• Coupons and incentive programs.
• Paying for filling surveys.
• Frequent user points.
• Example CyberGold.
• http//www.cybergold.com

14
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.

15
Entertainment

• Micropayments motivate impulse purchase.
• Virtual casinos.
• Online gaming
• Pay for game or for time.
• Winners can be refunded.
• Adult sites
• Preserve anonymity.

16
Web Services

• Public-specific services
• Virtual communities.
• Content-specific search engines.
• Brokers and meta-services.

17
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.

18
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.

19
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.

20
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.

21
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.

22
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.

23
W3C Proposal

• Common Markup for Micropayment Per-fee-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.

24
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.

25
Required Fields

• price amount and currency.
• textlink textual description.
• requesturl product identification.
• Payment systems systems supported.
• mpname system name.
• mpurl system address.

26
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

• ltEMBED 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.comgt
• lt/EMBEDgt

28
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.

29
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.

30
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.

31
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.

32
ECML Example

• ltFORM action"http//ecom.example.com"
  method"POST"gt
• Please enter card information
• ltpgtYour name on the card
• ltINPUT type"text" name"Ecom_Payment_Card_Name
  SIZE40gt
• ltbrgtThe card number
• ltINPUT type"text" name"Ecom_Payment_Card_Number"
  SIZE19gt
• ltbrgtExpiration date (MM YYYY)
• ltINPUT type"text" name"Ecom_Payment_Card_ExpDate
  _Month" SIZE2gt
• ltINPUT type"text" name"Ecom_Payment_Card_ExpDate
  _Year" SIZE4gt
• ltbrgt
• ltINPUT type"submit" value"submit"gt ltINPUT
  type"reset"gt
• lt/FORMgt

33
Electronic Wallet Systems

• Based on online connections
• CyberCoin (CyberCash).
• Semi-online
• Digicash (E-cash).
• Millicent (Compaq-Digital).
• Stored-value
• Mondex (MasterCard).

34
Cybercash
35
Digicash
36
Millicent
37
Mondex
38
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.

39
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.

40
New Schemes

• OneClickCharge Prepaid with credit card.
• http//www.1clickcharge.com/
• Qpass Aggregated with credit card.
• http//www.qpass.com/
• Ipin Charges to ISP bill.
• http//www.ipin.com/
• eCharge Charges to phone bill.
• Http//www.echarge.com

41
The Israeli Scheme

• Trivnets Wisp Charges to ISP bill.
• http//www.trivnet.com
• International Sales and RD Offices
• PO Box 18
• Shfayim 60990
• Israel
• Phone [phone]
• Fax [phone]

42
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).

43
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

44
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/