About once a week it seems me and David have a talk about micro payments on the web and a way to do them properly. Both of us agree it is a service badly needed but we also agree we do not want to do it =P. Right now if you want to send someone a small amount of money there just is no way to do it that makes much sense.
I am a huge fan of virtual “credits” or “points”. Basically people can cash in $10 or whatever the equiv currency would be and receive 1000 credits.. for fun lets just call them shoemoney dollars. Now people on their blogs or whatever could easily send money or “tip” other people for posts/content/whatever they like.
So I hear you… some of you out there are like well you can do that now with things like scratchback right? Sure you can but its REALLY inefficient. Let me show you why.
Just for instance I am going to use Shawn Collins blog affililate tip. As you can see I can send him $1 paypal to get a link on his blog via Scratchback:
Looking at the Paypal calculator Paypal is going to take 33% of the payment. So after Paypal takes there 1/3 of $1 and scratchback takes their 30% (I think that is their percentage but I could not find it on the site) That leaves like 40% some percent actually goes to Shawn Collins. Hrmmm
UPDATE: Jim from scratchback has emailed me and said scratchback only takes 10% not 30% as I guessed. I had 30% in my head not sure why.
BUT lets say Scratchback allowed me to buy ehhh… lets call it SCRATCHBUCKS where it was even a even swap $10 = 10 scratch bucks… And I could distribute those scratchbucks at my leisure to people who have scratchback accounts.
So for $10 now Paypal only takes out .59 cents or what amounts to 5.9%… Its still pretty high like 1/6th of what was being taken out before…
And the more you convert into “scratchbucks” the less paypal would actually take (and you could be compensated with more scratchbucks or something for depositing more at the time.
So under the current system if you were to “tip” 50 $1 bloggers Paypal would take over $16. But if you allowed deposits and made your own virtual currency like scratchbucks then Paypal would have only taken $1.75 =) Scratchbucks 4tw.
Ok I got a little wild with Scratchback as a example but the whole point is that I feel right now there is a huge need for a service that will handle micro payments. Even using paypal is probably a bad idea being that you could get a merchant account and get probably 1/2 to 2/3rds lower percentage then what Paypal takes. (which someone would obviously do with something like this).
The coolest thing is that you have basically created your own currency (IMO). You can set the rates.
I dunno maybe we will create a service for this when our current projects are done. Or maybe a reader will….
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January 3, 2008 at 1:26 pm
Also it would be nice to have a uncomplicated payment method for websites.
Imagine parts of your websites are not free – how do you want to bill? credit card? ppl don’t like to give their CC # away!
December 30, 2007 at 12:12 pm
The problem is that Paypal has the monopoly on internet payments and they know it. Ever since eBay bought the company fees have gone through the roof!
December 29, 2007 at 7:13 pm
Except eBay owns Skype
Although its tied in with paypal, i’m sure their profits from ebay will cover their losses.
December 29, 2007 at 7:09 pm
Some people like to give people small donations, hence sending $1
December 28, 2007 at 5:42 pm
Bitpass.com and Peppercoin.com used to do this and they had LARGE Backers Disney and Microsoft to name a few…
December 28, 2007 at 5:40 pm
Bitpass.com and PepperCoin.com used to do this and they had LARGE Backers Disney Microsoft to name a few…
December 27, 2007 at 8:22 pm
Wish PP would lower their dam fees. Quite annoying, they take too much. Considering how many transactions they must assist every minute…. I think they can afford to cut their cut a bit, I think it would benefit them to a degree. People would appreciate it.
Not to say that if I owned PayPal I would
but still (angry!)
December 27, 2007 at 9:41 am
That’s super interesting, but Im sure there will a whole lot of people trying to do this, but they need to earn trust before people will start using the service, and that is hard to earn IMO.
December 26, 2007 at 10:08 pm
Paypal can’t lower their fees, they still have to pay off their white elephant, Skype!
December 25, 2007 at 10:16 am
hmm its really interesting.
this is a great idea.
December 24, 2007 at 11:40 pm
so hmmm – who is going to do it?
December 24, 2007 at 2:24 pm
yes its really interesting
December 24, 2007 at 10:44 am
Sooner of later someone at the big fat evil G complex will take on this micropayment monster and crush everyone. I actually hope they do it soon because outside of the blogger community sending micro payment to people or individual across the world should be easy and efficient. It a project that needs scale to work but its an important project. But than again Paypal could just lower their fees. Even if the Big G just threatened to invest in this I’m sure you’d see Paypal lower their fees overnight.
December 24, 2007 at 8:15 am
Thats cheating the advertiser of the PPC Advertisements out of money.
December 23, 2007 at 7:26 pm
Micropayments been in Norway for some years already – and it’s growing fast! One of the companies that has been in front is Contopront – now .
December 23, 2007 at 2:39 pm
Shoe, maybe you could come up with something. The $1 example is great, but I’m not sure why I would be sending someone $1 over the net at this point.
December 23, 2007 at 11:43 am
Paypal doesnt workin alot of places
December 23, 2007 at 8:59 am
yea, what he said
December 23, 2007 at 8:11 am
Paypal doesn’t even work in SA. Its really irritating
December 22, 2007 at 10:17 pm
Why bother with a virtual tip jar? Just click on a PPC ad or two to send a few bucks to your favorite blogger. And it won’t cost you a penny to boot.
December 22, 2007 at 3:26 pm
Mainly because, they either can’t code something like this and/or have the money required to get this going.
December 22, 2007 at 3:25 pm
I’ve not heard anything about this in the United Kingdom. Where are they offering this?
December 22, 2007 at 3:24 pm
Well don’t sell $1 ads then
December 22, 2007 at 2:44 pm
An interesting idea, but not something that I’m passionate about to go out and do. I like how everyone wants someone else to do it though.
December 22, 2007 at 11:45 am
“20% of the transaction amount, with a minimum fee of $0.0025″
that is only for transactions below .05
for anything from .05 to $10 it’s
* 1.5% + $0.01 for Amazon Payments balance transfers
* 2.0% + $0.05 for bank account debits
* 5.0% + $0.05 for credit card
December 22, 2007 at 11:20 am
No juice passed Santa. All hard-coded nofollow built in, and it’s built on javascript anyway. It’s like running off an ad server, No juice passed at all.
December 22, 2007 at 9:51 am
Is this what you’re looking for?
https://www.revolutionmoneyexchange.com/
The company Chairman is AOL co-founder Ted Leonsis.
December 22, 2007 at 6:45 am
I thought Google’s checkout would have had a bigger impact on Paypal fees, shame. Come on Shoe give us a micropayment option that works!
December 22, 2007 at 5:58 am
Yep SMS works best for micropayments
December 22, 2007 at 5:38 am
In lots of places in Europe we do micropayments through SMS. So if you want to donate someone $1, you would pick up your phone and send a code to a specific phone number. Its not a very cheap method though, as telecom companies charge a lot as well.
December 22, 2007 at 12:43 am
Agreed!
December 21, 2007 at 10:26 pm
What is the exchange rate of Shoemoney dollars to Stanley nickels?
December 21, 2007 at 10:00 pm
this would be such a cool idea for ringtones, ecards and such. Hope you get to it in the future
December 21, 2007 at 9:53 pm
I know this is slightly off-topic from the post (which is about transaction processing more than scratchback) but isn’t it only a matter of time before the search engine hammer comes down on scratchback users? It’s link buying, and companies that provide more in the way of service for the dollars have been penalized for passing juice…
December 21, 2007 at 7:06 pm
This is a great idea!
I’d love to make something like that!
December 21, 2007 at 6:38 pm
I love this idea. I hate selling $1 ads and getting only $0.60
December 21, 2007 at 5:42 pm
The big issue with micropayments is that every transaction has a fixed cost to perform the transaction. That cost includes everything from equipment and bandwidth to personnel and a certain amount of fraud, etc.
That cost is the same whether the transaction is for $1 or $1MM and it only changes with the size and efficiency of the company performing the transaction. I don’t see an easy way to perform millions of $1 transactions with total overhead and profit adding up to 10%. Even if it was profitable, there’s much better money to be made elsewhere with the capital. It’s a question of ROI.
December 21, 2007 at 3:57 pm
Or ebay/paypal could just lower their rates for lower amounts
December 21, 2007 at 3:56 pm
Not worth it making a site to offer “Small Dollar Virtual Currency Trading”. Why? Well there’s going to be little % to the creator, so what they are spending running the thing, they will be lucky to generate back with all the trades.
December 21, 2007 at 3:47 pm
Yes, we use mass pay for payments, it works great.
December 21, 2007 at 3:46 pm
Yeah, I get it now after emailing with Shoe earlier today. It’s a good idea. Lots of logistics involved in this type of solution though, but something to think about for sure.
December 21, 2007 at 2:56 pm
Hahah… yeah I did at one point, but didn’t re-read recently. mybad
December 21, 2007 at 2:36 pm
Hmmm. definitely something to ponder
December 21, 2007 at 2:33 pm
20% of the transaction amount, with a minimum fee of $0.0025
that is just processing fees there is also transfer fees … did you actually look at the site =P
December 21, 2007 at 2:27 pm
Flexible Payment Service
December 21, 2007 at 2:25 pm
Amazon has a limited beta Flexible Payment Service’ that seems like it could take care of this… They even claim so in their marketing materials
December 21, 2007 at 1:40 pm
personal is limited to only 500 per month withdrawl… good luck running a business with that
December 21, 2007 at 1:35 pm
With PayPal you are allowed to have two accounts… one business/premier (which charges fees for receiving funds) and one personal account which does not charge fees.
Wouldn’t it be possible to have anyone paying by debit/credit to pay your premier account (the only account type they can send that payment type to) and anyone paying by instant transfer or echeck to send it to the personal account (which is a fee free transfer).
This would diminish the costs somewhat.
December 21, 2007 at 1:29 pm
Awesome suggestion Shoe. Makes perfect sense for someone like ScratchBack to use this… hope they take it into consideration.
December 21, 2007 at 1:07 pm
There are ways around the paypal fees with Mass Pay. I use it all the time for sending $$$ using paypal.
“Competitive pricing
A low fee of 2.0% of the payment amount with a cap of $1.00 USD (or its equivalent in the payment currency) is assessed on each payment made with Mass Payment. ”
there’s no flat rate/minimum fee so you could send $1 and only get hit with a .02 fee
December 21, 2007 at 12:46 pm
they do just not for business accounts or anything doing over 500 a month which obviously wouldnt work =(
December 21, 2007 at 12:46 pm
I have updated the post
December 21, 2007 at 12:45 pm
Jim I think you are missing shoe’s point. Its not really about getting rich but more wasting money.
If you were to implement scratchbucks which should be pretty simple compared to what you have done shoe pretty much lays out how it would work and it makes sense to me
December 21, 2007 at 12:44 pm
This would be interesting… It would be great though if they could knock down the %’s alot and make money off of interest or anything.
December 21, 2007 at 12:41 pm
I checked with our paypal rep before writing this and she said that there was a small service for micro payments but it was caped and also business accounts were not eligible
December 21, 2007 at 12:30 pm
This is very much needed. I would be interested to know if there is already a great service without a good enough marketing strategy to get it to the masses?
December 21, 2007 at 11:29 am
I always thought PayPal was blowing it by not having a majorly reduced rate for payments under $2 or $5 or something small like that.
December 21, 2007 at 10:50 am
That is the main reason that people can’t do this.
The internet is global, and at the moment even paypal does not cover all the countries in the world. Paypal is not available in Pakistan, but there are alot of bloggers there. If someone wanted to make a micro-payment system they would have to consider the amount of fraud that would be involved. I mean even YAHOO has trouble tracking fraud
.
Plus with all the new money regulations and laundering laws, and different countries and jurisdictions it would be a nightmare.
I will probably look back at this comment and be eating my shoe, when shoemoney makes his own micro payment system to spite us all.
December 21, 2007 at 10:44 am
It would be great to have something like this setup, and I’m looking forward to seeing if something like this comes around in 2008 that actually works and gets used.
On a side note, I have been testing with ScratchBack on my blog for the past couple weeks now and it has been doing pretty well.
December 21, 2007 at 10:32 am
Someone do this – today, please!!!
C’mon Shoe… this could be your next auctionads. Could end up selling to eBay/Paypal for $xxx,xxx,xxx
December 21, 2007 at 10:05 am
Well there is moneybookers.com, they only charge 1% for transfers. I think money laundering laws make it hard too run an own Service. And even moneybookers whith 10 million users is a nobody compared to paypals 140 million userbase.
December 21, 2007 at 9:27 am
Shoe, ScratchBack only takes 10% after the PayPal fees, not 30%.
December 21, 2007 at 9:26 am
Shoe’s right, Paypal is inefficient as a sole option for payments. However, it should be pointed out that the vast majority of people use ScratchBack for “micropayments”, which PayPal considers $12 or less.
Why use PayPal? Because frankly, if you’re going to tip someone $1.00 using the widget, are you going to whip out your debit or credit card? No, you’re not. PayPal is like funny money, and you can tip someone in half a minute, with a quick login and a couple of clicks.
ScratchBack was built as a fun tool for bloggers who like to allow their readers to give back in tips, and allow them to give back in nofollow links, not a “get rich” tool.
December 21, 2007 at 9:14 am
I’ve seen micro payment websites before, but the problem is so many people try to create such a service (because it’s needed) but they don’t have the resources to actually do it right (and legally). Come on Shoe “Just do it” =P
December 21, 2007 at 8:56 am
Not to say that you didn’t do due diligence before posting shoe, but PayPal does do micropayments at a lower rate. I’m not huge PayPal fan or anything, but I saw they did micropayments a while back, so you should probably check it out. Just google paypal micropayments and I think it’s the first result.
Their rate is something like 5% + 0.05 on purchases up to $12. It’s not great, but on a $1 tip that’s only 10% instead of 30+%.
December 21, 2007 at 8:25 am
scripting is not a problem – dealing with the banks and merchants is
December 21, 2007 at 8:14 am
Jim Kukral – Taking notes? This is one suggestion that implementing would make sense
December 21, 2007 at 8:13 am
On the ball there mate, these are the posts you make that I love to read, the reason I have you in my Bookmark Toolbar. Very cool to read, well spotted