Money for (Almost) Nothing

Last year, Internet ''micropayments,'' low-value (typically $5 or less) electronic transactions, totaled $1.9 billion.
CFO StaffSeptember 20, 2004

Who remembers Flooz? Or Beenz? At the height of the dot-com craze, they were among the alternative currencies proposed as a way to facilitate low-value (typically $5 or less) electronic transactions.

Early efforts failed, but the idea of an electronic payment that could be used for such transactions without requiring much in the way of processing or customer-service costs continues to intrigue, and now research firm TowerGroup reports that several trends may combine to reignite the concept.

Last year, Internet micropayment transactions totaled $1.9 billion, driven by the booming markets for online music (where songs may cost 99 cents or less) and cell-phone ring tones. Online publishing content was also a driver. Several methods of payment are currently in keen competition, including merchant aggregation, in which a company keeps track of small charges and then submits them as a single transaction; prepaid accounts, in which a customer prefunds an account and draws upon it; and direct transfer, in which funds are pulled directly from a customer’s bank or other account.

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TowerGroup expects all these methods to remain viable, and says financial institutions, E-tailers, and other corporate entities should take a close look at how to facilitate such transactions as economically as possible.