Ask HN: Best Micropayment Service

https://news.ycombinator.com/item?id=3260417

by Husafan • 15 years ago

11 15 15 years ago

news.ycombinator.com

I am brainstorming ways to monetize a chrome extension/firefox plugin and a simple donate button came to mind. I would love to hear from the community about the best micropayment systems out there. Also, any advice on the best kind of for-profit organization (LLC?) to form for this situation. Thanks!

patio112• 15 years ago

People mean a lot of things when they say "micropayment." You might mean $0.05 or $5.00. If you mean $5.00, the best solution is Paypal (or Stripe if you live in the US). If you mean $0.05, stop now.

Tips:

1) Don't call anything a donation if you're not a registered 501c tax exempt charity. (You won't be.) Instead, let people buy a supporter button on your home page or a "registered" version of the software with whatever trivial difference you want. (e.g. displays "registered" or "Thank you!" in the about screen.) This is a preventative inoculation against lots of trouble down the line with your credit card processor.

2) If you don't have a specific reason for forming the LLC, skip it and take money as an individual. Many devs have an inchoate fear that this is somehow illegal. That is the opposite of the truth: sole proprietorship is overwhelmingly the most common form of business operation in the US.

3) Do not encourage people to pick their donation amount. Instead, pre-pick three, which you can assign three levels of status to (bronze, silver, gold, whatever -- you and I know it is meaningless, but the customer won't perceive it that way) and price them at modest, generous, and high. e.g. If you are thinking $5 right now, I would suggest $10, $20, $30 or $10, $25, $50. You'll get most of your transactions at silver and make most of your money on gold.

GFischer7• 15 years ago

Hi patio, I'm working with some classmates on a micropayments startup, and we're looking at solving the $0.05 side, so I'm really interested in knowing why do you advise people not to?

I live in Uruguay, $0.05 is a very common amount ("un peso").

patio112• 15 years ago

I would strongly advise rethinking starting a payment processor as a student. It is relationship-, credibility-, and capital-intensive. It also requires truly massive scale before being worth any money. (Incredibly massive scale in micropayments. If you make $0.01 off each transaction you have to facilitate hundreds of thousands a month just to pay for the founding team's ramen. If you somehow possess the magic that you need to find 100,000 paying customers you shouldn't end up eating ramen!)

There are basically two ways to do five cent transactions. The first way is to buy a virtual currency for a non-micropayment amount (e.g. $5 or $25) and then subdivide that virtual currency into infinitely divisible bits which you can spend seemlessly within the application. This is the successful, Zynga-esque way to do micropayments, and it sits nicely atop the legacy payment infrastructure, which is entirely suited to doing $5 or $25 transactions.

The other way, where you attempt to make an actual transaction for $0.05, is an operations nightmare. The legacy payment system is fundamentally not equipped to handle it. The conversion rates to purchases will be terrible, because of the "penny gap" (asking people to spend money, and in particular asking them to make a new relationship to spend money, always causes a huge dropoff) and the conversion rate will not be meaningfully higher than if you had charged $5. Customers hate the experience of authentication for $0.05 transactions even more than they hate actually paying money, and common schemes for doing the auth once and then bundling transactions across merchants like e.g. Flattr are basically a non-starter for most users.

(I'm largely speaking about making services for the global rich here. It is possible that the situation in Uruguay is different, although I'd still suggest not getting into this field as a student.)

Hrundi• 15 years ago

Hello GFischer. If you allow me to chime in, I'd say that its about the payment processor eating away the sale.

For example, Paypal has this Micro Payment option: https://micropayments.paypal-labs.com/?bn_r=m

$0.05 cents + 5% per transaction.

Its just not feasible. I can't remember, but Facebook is not helpful when dealing with low payments for game items.

I believe MercadoPago is not in Uruguay. Seems weird.

I'm researching MercadoPago for a personal niche project of mine in Argentina (where I live, hola!) and I found that the minimum amount is ARS $10, which is around USD $2.30 or $2.40.

thaumaturgy• 15 years ago

WePay (https://www.wepay.com/) is a YC alumni company that seems to be doing well as a sort-of alternative to Paypal. Paypal can be fickle; if you never have trouble with them, they're convenient and easy and everyone knows who they are so you don't have to worry about convincing people that it's OK to use them. On the other hand, there are a lot of Paypal horror stories.

GFischer7• 15 years ago

They have a 50c minimum, is it really micropayments?

Sounds good :) and the fees are very reasonable (3.5%)

GFischer7• 15 years ago

Hi Husafan, I'm working on a micropayments startup, we're not operational right now, but I researched a lot of alternatives :) so I'll list some:

BuySimple https://www.buysimple.com/ is the one I liked the most (and the one most similar to my own service)

There are a lot of SMS micropayments services with a very high per-transaction cost:

http://www.daopay.com/?language=es

http://www.boku.com/

http://zaypay.com

A trade website:

http://www.thepaypers.com/