What is a micropayment?

Let’s explore the concept of micropayments in the context of payment processing and monetary value.

A micropayment is a small transaction usually under a threshold value where the traditional fees associated with digital payments options such as cards or digital wallets become too expensive or impractical to carry out. In some cases, these payments could be less than one dollar and in other cases few cents (pennies). Some payment processors consider micropayments as those where the amount is $5.00 or less.

Card processors normally charge the merchant a transaction fee which include a lump sum and a percentage of the purchase price. Based on this scheme, the fees associated with processing a micropayment could be higher than the purchase price or be as high as fifty percent (50%) or more of the purchase price. Thus, the cost of accepting these payments in other form rather than cash becomes cost prohibitive.

Web3 to the Rescue

The advent of blockchain and cryptocurrencies would lead you to believe that these new payment methods could become an alternative to fiat cash for micropayment as the transaction fees could be denominated in very small amounts. These payment methods could accommodate fees which are much lower than the minimum unit of a fiat currency which is normally one hundreth (1/100) of the fiat unit.

However, the major networks such as Bitcoin and Ethereum normally have mining and transaction fees that in combination could levy merchant fees much higher than the actual micropayment purchase price,hence making those methods even more cost prohibitive than using the credit card schemes. Not to mention the speed to complete a transaction could take several minutes and the price volatility could reduce the value received at the moment of the purchase.

Despite these limitations, it is feasible to consider other blockchains to make digital micropayments a reality. Using the same principles that govern mainstream networks like Bitcoin or Ethereum, a merchant could employ a more efficient blockchain to handle micropayments.

At Netclearance, we specialize in creating bespoke Web3 networks or Dapps that allow merchants to issue and accept their own digital tokens pegged one-to-one with fiat monetary value using mobile wallets and contactless technologies based on Bluetooth LE (BLE), a technology which is present in 100% of smartphones and wearables today.

For more information about our retrofit modules and end-to-end mobile wallet solutions for micropayments contact us