The basic flaw with small monetary transactions, whether internet related or not, is that the processing charge levied by banks and credit card companies eats a big chunk of the value of your original sale.
The road to creating an efficient micropayment system is littered with the corpses of those who didn’t make it – ecash, digicash – weathered corpses stripped clean from their deaths in the late 90s.
Yet, deep down inside, we know that micropayments must work. Like the first farmer who experienced frustration when he tried to pay for some wood with a cow, only to be told “Sorry mate, I can’t change that – have you got anything smaller?”, we know there must be a way of making transactions more efficient.
Peppercoin, backed by the R in RSA, Ronald Rivest, have brought the micropayment system up to the 21st century, and have launched version 2.0 of their service. Peppercorn 2.0 is aimed at online retailers who shift low-priced digital content and physical goods, or offer subscriptions and pay-per-use services – so it won’t just be ringtones then.
The company has concentrated on making the experience as transparent as possible for the user, as customers can use their credit card to pay a merchant without having to register or create an account. Neither do they have to pre-deposit any money to get started – I can think of at least two micropayment systems from about 1997 that owe me at least US$3.
Merchants and vendors don’t even have to be web-based – one of the key applications of Peppercoin is in coin-op games. The new version of Golden Tee Golf (coming to a pub near you) will feature the Peppercoin system to provide cashless purchases. If I’m hearing you say big deal, then consider that punters spent US$350 million (€288 million) playing this one game last year alone. Peppercoin are well aware that when you allow people to use their credit card at point of sale, they will usually spend more.
The new service works by aggregating low-priced transactions across many consumers, merchants and payment providers, reducing the average processing fee for each individual sale. Customers pay by entering their credit card details online, or by swiping their card through a reader on the device they are paying to access.
Customer service is cleverly automated to keep costs down, with integrated bills and automated pre-dispute resolution dealing with most cases before expensive people have to get involved.
How efficient is the payment system? Peppercoins fees work out at about 10% of a US$1 transaction, which the company claims is 70% less than the usual card not present processing fee.