Ask HN: What are the barriers to micropayments?

https://news.ycombinator.com/item?id=2593362

by crasshopper • 15 years ago

12 17 15 years ago

news.ycombinator.com

A lot of cool things would be feasible if only apps could get a few cents per user. I assume the reason this hasn't happened is neither lack of intelligence nor lack of trying. So what is keeping micropayments from being a reality? Is it the cost of processing payments? Users are unwilling to pay even a few cents? Something else?

bediger• 15 years ago

My guess is that some psychological factors make them impossible to use. Maybe some combination of that bias where most humans won't wait some time for a larger reward later, and the amount of effort it takes to keep track mentally of where you're making a micropayment, and where you're not.

I would guess that the closest analogy would be metered long-distance telephone time vs flat-rate. I bet that a significant portion of those going flat rate actually paid more for it than when they were metered.

wmf• 15 years ago

Partly psychological: http://openp2p.com/pub/a/p2p/2000/12/19/micropayments.html

Partly technical: You can't do micropayments using credit cards. You can aggregate payments across sites, but there's a chicken-and-egg problem that has prevented payment aggregators from reaching usable scale.

crasshopper8• 15 years ago

Why can't PayPal do micropayments? Aren't they large enough?

benologist• 15 years ago

They do as of earlier this year:

https://www.paypalobjects.com/IntegrationCenter/ic_micropaym...

crasshopper8• 15 years ago

I don't understand Clay Shirky's argument. He repeats several times that micropayments have not come about and treats this as evidence both that they cannot work and that users hate them.

How can he be sure, since micropayments don't exist, that they would fail if they did exist? What about an App Store that charged 50¢ for an app? What about a chance to add-on a 15¢ donation to a charity after buying a stream of a $1.15 TV show? These don't sound like such taxing choices to me ("low mental transaction costs" in Shirky's phrasing).

Shirky refers to "history" several times but he's a bit vague about it. I'm not sure whence he draws his conclusion about user opinion. Maybe he is thinking of some examples that I'm not.

In my view "history has taught us" that once a system becomes familiar to users, they accept it and work within that system. So it then reduces to a chicken&egg problem.

keeptrying• 15 years ago

Where do u micro pay for anything in the real world?

I think micropayment should be a hidden implementation detail. Users should only have to pay like they do for regular things.

crasshopper8• 15 years ago

Micropayments are easier to implement computers and a sophisticated financial system.

adrianwaj2• 15 years ago

Transactions costs, minimum payments, infrastructure and complexity. To make a long story short, bitcoin can do micropayments because the transactions costs are very low, highly divisible denomination, straightforward addresses, no definite need for forex, and there is no intermediary financial institution. I think a framework might need to be laid over the top, however.

crasshopper8• 15 years ago

Can you elaborate on that? In particular

- Why can't aggregators overcome the transactions costs? MoneyGram does so for remittances from US to Mexico.

- What's not straightforward about "addresses" ? (Which addresses do you mean?)

- Don't intermediaries sometimes lower the overall costs.

Thanks for the thoughtful answer.

adrianwaj2• 15 years ago

In principle, anytime money goes through someone else on its way to its destination for some benefit, purpose or reason, who is going to pay for that intermediary's existence?

If you need to do a bank transfer to someone, you need their bank account number, bank name, account name, branch address, branch number, reason for transfer. A system that needs all this info is a complex system, and that system needs to be maintained, and that maintenance is by extension costly (due to its complexity.)

An intermediary might lower overall cost by enabling something to occur that couldn't occur in the first place, but why couldn't it occur in the first place? How helpful are bank transfers when they take 3-5 working days?

The banking sector is massively wasteful in my view. Parts might be justified, but other parts not.

If people are going to hate on bitcoin because they can't buy it, or don't want it to work (or whatever,) I can hate on the banking sector for eating time, money and efficiency.

petervandijck• 15 years ago

1. Psychologically: it takes as much effort to decide to pay 0.01c as to pay 0.99c.

2. Practically: transaction costs.

crasshopper8• 15 years ago

Peter, is that true for non-OECD countries? Many poor Brasilians are on the Net and 5¢ is not negligible to all those users.

Clay Shirky also mentioned the "psychological cost of deciding" in an article linked in another comment. But what's the (quantitative) evidence for these statements?

malandrew• 15 years ago

Micropayments need to be treated like pre-paid activities like consuming gas when you drive from one location to another. i.e. the decision to spend money must be automatic based on your behavior. For example, when I drive to the store, I do so without ever thinking "it's going to cost me 14 cents in gas to go there and back. Am I sure I want to go?"

For micropayments to work, consumptive behavior needs to be used as a proxy for a decision to purchase.

crasshopper8• 15 years ago

That's really interesting. Like Amazon Web Services.

fastspring• 15 years ago

Processing payments generally involves a minimum per transaction fee that is often too large a percentage of the microtransaction product price itself to make it work. As mentioned by another user, Paypal has a relatively new microtransaction processing service that helps address this problem, though, so there is some progress, at least for microtransactions of a certain size.

Ask HN: What are the barriers to micropayments?

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