Payment platforms are making a consistent effort to reduce the friction of allowing apps to accept micropayment transactions online. From lowing transaction fees to seamless in-app integrations, companies are striving to enable consumers to engage in one-click impulse buys – a model Amazon has done well in. The payment giant Paypal, according to the Associated Press, is also on a path to simplify online digital goods purchasing and will be rolling out a new payment product by the end of year to help businesses collect micropayments on the web.
Credit cards can be poisonous to merchants for smaller purchases, eating away at profits because of their transactional costs. Scott Thompson, the online payment service’s president, believes that an average consumer wants to be able to buy items one at a time in small increments. To make this work, Paypal will allow someone to buy, say, $10 worth of goods before billing them.
Consumer behavior has evolved since the 1990s when online micropayments first emerged and is now more attuned to idea of purchasing digital goods and virtual items in online games. Digital goods, comprised of music, videos, and software, made up $2 billion of the total $71 billion in Paypal’s payment volume last year. Paypal’s merchant model for websites charges a fee of 5 percent plus 5 cents for small transactions (those less than $10), hence charging 20 cents in transaction fees for a $3 microtransaction. Under Paypal’s normal fee schedule, this same transaction would cost 39 cents. This is good news for virtual worlds and mmo games that have millions of users purchasing items as small as virtual swords for a few dollars.
Paypal last year rolled out their in-flash support that allows a seamless integration of micropayments in flash games for users so they don’t have to leave the game area to get currency. Many consumers assess digital goods emotionally and enabling them to impulse buy is key to a healthy virtual economy. EA/Playfish and Zynga were some of the first companies to pioneer in-game purchases on Facebook, paving way for the rest of the industry to see what works and what doesn’t. But even know the experience isn’t that smooth and players have to leave the game mid-session to make the payment. Paypal’s upcoming product should solidify their earlier launched initiative, preserving the act of purchase solely within the game without feeling like interruption.
