Types of Micropayment

Micro-payments include commercial transactions online for small sums. Often, businesses wish to sell information and other abstract items for small sums. The challenges for e-commerce businesses, however, are to keep transaction expenses to a minimum. There are various types of micropayment models.

Prepay Model

This model often assumes the shape of a subscription that allows access to users for a specific amount of usage or period of time. Social media sites, online games, and newspapers are some of the instances of advance payment. The benefit of this approach is gift cards for customers not having credit cards and a high buying price sufficient to cover the expenses of the business transaction. However, the disadvantage is that customers have to make an upfront lump sum payment. Also, e-commerce businesses have to use a state-of-the-art system for recording individual use and the rest of the credits.

Post-pay Model

With this approach, there is an aggregation of various microtransactions and these are charged after the occurrence. The most prominent instances include online music sales having charges after the purchase of various individual songs. A few online businesses have combined this approach properly with the prepay model. The benefit of this model is that there is no need for an upfront payment.

Collaborative Model

The most viable model of micropayment, for online publishers, includes a business collaboration approach that links more than one site. Not every online publisher has enough readerships for supporting a lucrative micropayment system. Thomas Baekdal, one publisher, has given the name ‘Associated Micro-Payment System’ to the model due to its resemblances to the development of the Associated Press. This model is advantageous, given that numerous online publishing businesses can make extra financial gain for written content.

Pay-As-You-Go Model

This type of micropayment, as the name of this approach indicates, involves making a payment as every transaction happens. In practical terms of business, such a technique is not effective — given that transaction expenses can easily surpass the sale amount. The main advantage of this model is that it is supportive of customers who have to pay for just what they wish. But the primary disadvantage is that businesses that are serious about profits will have doubts to support the approach due to the potential of suffering financial losses on lots of transactions.

Brad Nickel of Gobyte believes that “the ultimate goal is to make using crypto easier and better for merchants and consumers in everyday life, offering instant, secure and reliable payment solution”. Increasing accessibility to cryptocurrency in one of the three action points for the CrowdForce Platform. When this becomes a reality, high processing fee which is one of the major downsides of micropayments could be eliminated due to the deregulated nature of cryptocurrency.