Micropayment

Micropayments are means for transferring very small amounts of
money, in situations where collecting such small amounts of money with
the usual payment systems
is impractical, or very expensive, in terms of the amount of money
being collected. "Micropayment" originally meant 1/1000th of a US
dollar,[1][2],
meaning a payment system that could efficiently handle payments at
least as small as a tenth of a cent, but now is often defined to mean
payments too small to be affordably processed by credit card or other
electronic transaction processing mechanism. The use of micropayments
may be called Microcommerce.

Almost all real-world examples touted by micropayment supporters
actually involve a larger granularity than the traditional penny. The
minimal granularity in Yoho! Puzzle Pirates is a "doubloon", which
costs between $0.20 and $0.25. iTunes
can be seen as a failure of micropayments since Apple chose a very
large price granularity: one dollar, far higher than the traditional
granularity of one cent. This confirms a critic prediction that
tolerable price granularity is somewhat larger on the Internet than in
traditional markets because the average budget of the Internet shopper
is higher, and such a shopper puts in less shopping effort per dollar.
This effect will be reduced as more poor people get on the Internet for
services in which the poor form a substantial part of the customer base.

At least one critic has suggested that the mental transaction cost
problem may be solvable in some circumstances, via innovative user
interfaces that input persistent customer preferences. However,
micropayment vendors have generally failed to address this problem,
choosing instead to focus on what critics see as irrelevant reductions
in computational transaction costs.

Another criticism is that minors and others without credit cards may be deterred; even in a developed country where credit cards are widely held, borrowing a friend’s credit card is a further inconvenience.

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