But credit cards have their limitations. They are not ideal for purchases of digital content charging less than a few dollars per deal (micro-payments). The card system is not inexpensive for processing small payment amounts, and in many cases the minimum transaction quantity is around US$10.
To sell digital content, a different payment method is required. Within the early days of the internet, developers produced? e-money,? enabling consumers to purchase cheap items online from a website backed by the e-money provider. However , there was clearly the potential for fraud on the part of the e-money providers, to whom consumers provided their credit-card numbers in exchange with regard to tokens.
Many of these early attempts to generate e-money mechanisms for managing micro-payment transactions schemas met with company failure (e. g., early micro-payment vendors such as Flooz, Benz, Digicash). Even for feasible business cases, the failures often occurred since the merchants had to implement additional hardware/software requirements, and the customers had to pre-pay. It was simply too difficult to implement, instead of worth the (then) small income streams from the internet.
But the situation is a lot different now. New micro-payment providers allow customers to set up online accounts associated with their chequing and savings accounts, thereby reaching a whole new segment of customers without credit cards. Micro-payment also has another future as a replacement for cash to purchase goods and services at shops, cafes, bars, libraries, printers, pharmacies, sports centres, photocopying and laser-printing shops, as well as for bus and taxi fares, or for any purchase in which coins are used.
What are evolving from the early efforts are three distinct micro-payment schemas:
– The Retail Model which usually utilizes a stored value program
– The Telco Model which leverages the telcos? billing program
– The Financial Model which uses a multi-application smart card with an e-purse
The Retail Model – Stored Value Systems
The principal of the kept value systems is based on the micro-payments schema: store value accounts are connected to a credit card in which a consumer has to load credits in order to make a purchases, or connected to a stored value account that accumulates payments and makes authorizations based on increments.
Using a stored value system, the customers need to register for the services online or even by phone; they have to provide a bank card number and load a balance. To ensure that the consumer to be able to make re-loads, the system needs to remember his or her information. Kept value systems are common in the service industry, for example as part of the McQuick program in Canada.
Telco Model – Micro-Payment Billing
The rapid transmission of GSM handsets has already led to a situation in which more individuals carry a telephone than carry a bankcard. Additionally , people tend to have a single mobile telephone from a single operator, whereas they might have multiple bankcards.
This suggests that mobile operators have access to demographic segments not available to traditional financial institutions. By targeting the right demographic group, mobile operators can use their very own billing systems to register micro-payment transactions. Pricing wireless applications on a per-use or subscription basis is the best way to appeal to consumers and to give them worth for their money. More importantly, separating content fees from transport fees allows carriers to keep all transport revenues while enabling a revenue flow for content providers.
The Monetary Model – Smart Card with E-Purse
The smart card uses chip card technology and is designed for secure payments over the internet and mobile phones, and for micro-payments such as those made in fast-food restaurants, movie chains, convenience stores, snack machines, payphones, and on mass transport and toll highways. A smart cards payment scheme can manage low-value and high-value payments. The low-value payment scheme is known as e-purse, that is a cash-like, prepaid scheme, where the user has the choice of making either customized or anonymous payments.
Purchases can be made on the internet by a smart card reader that connects to a PC. Safe internet payments may be made just like they are in shops which use this product. The internet merchant uses a terminal which is similar to a normal shop merchant? ersus, and payment and collection are created in the same way.
An example of an intra-regional regular for cash is the NETS Singapore CashCard under the Visa Cash brand, which has been implemented in Singapore, Philippines, and Korea, and recently in Thailand.
Standards are required to develop nation-wide smart card? based electronic purses that operate on a regional basis. Coupled with the possibility of location-based services driven by the mobile telephone network, the mobile telephone operator is well situated to market goods and services to consumers on an one-to-one basis.
There are a number associated with challenges facing the retail banking sector today. The tradition of providing a customer with account entry via a cheque or magnetic candy striped card is no longer the way to attract or retain ever-more-discerning consumers. Escalating cards fraud and new delivery stations have changed the business landscape forever.
Micro-payments tied to a chip credit card could be a winner. The trends indicate that the most feasible solution? and the one increasingly embraced worldwide?
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appears to be the smart card, a plastic card which usually stores all personal data in its embedded microchip and which can be used for many functions, thereby doing away with the need to stuff wallets with many other single-function plastic cards. Another factor could be the migration of credit and free e cards from magnetic strip to EMV, which allows these cards to be used seamlessly for micro-payments.
The users have already been well-informed. They know how to use plastic credit cards, and using smart cards would be the exact same, but common standards are important. The particular added advantage with a chip cards is that a loyalty feature could be added to the chip, a natural expansion which none of the other micro-payment strategies can handle well.
There are some issues of a smart card schema. For example , security needs to be foolproof: once a card has been breached, the cost of replacement is high. Safety costs money, and so smart credit cards tend to be more expensive than other methods.
With the stored value system, the thing is user acceptance. Users have to deal with their own accounts, and if there are many different providers the user has many accounts to manage. In order for a real stored value system to work, the banks have to get behind it and adopt a standard which retailers can sign up for.
The success of the cellular operators will depend on the number of merchants or even content providers who adopt the particular operators? billing systems. In order to appeal to customers, merchants are offering phone-customization features such as ring tones, games, display screen savers, and music. It is a good market, but the real adoption will happen only when merchants can accept obligations.