Micropayment

A micropayment is a financial transaction involving a very small sum of money and usually one that occurs online. Several micropayment systems were proposed and developed in the mid-to-late 1990s, which were ultimately unsuccessful. A second generation of micropayment systems emerged in the 2010s.

While micropayments were initially envisioned to involve very small sums of money, practical systems to allow transactions of less than US$1 have seen little success. One problem that has prevented the emergence of micropayment systems is the need to keep costs for individual transactions low, which is impractical when transacting such small sums even if the transaction fee is just a few cents.

There are several different definitions of what constitutes a micropayment. PayPal defines a micropayment as a transaction of less than £5 while Visa defines it as a transaction under 20 Australian dollars.^{[verification needed]}

The term was coined by Ted Nelson long before the invention of the World Wide Web. Initially, this was conceived to pay the various copyright holders of a compound work. Micropayments, on the Web, were initially devised as a way of allowing the sale of online content and as a way to pay for very low-cost network services. They were envisioned to involve small fractions of a cent, as little as US$0.0001 to a few cents. Micropayments would enable people to sell content on the Internet and would be an alternative to advertising revenue. During the late 1990s, there was a movement to create microtransaction standards, and the World Wide Web Consortium (W3C) worked on incorporating micropayments into HTML, even going as far as to suggest the embedding of payment-request information in HTTP error codes. The W3C has since stopped its efforts in this area, and micropayments have not become a widely used method of selling content over the Internet.

Established companies such as IBM and Compaq had microtransaction divisions in the late 1990s. Research on micropayments and micropayment standards was performed at Carnegie Mellon and by the World Wide Web Consortium.

IBM's Micro Payments was established c. 1999, and were it to have become operational would have "allowed vendors and merchants to sell content, information, and services over the Internet for amounts as low as one cent".

An early attempt at making micropayments work, iPIN was a 1998 venture-capital-funded startup that provided services that allowed purchasers to add incremental micropayment charges to their existing bill for Internet services. Debuting in 1999, its service was never widely adopted.

Millicent, originally a project of Digital Equipment Corporation, was a micropayment system to support transactions from as small as 1/10 of a cent up to $5.00. It grew out of The Millicent Protocol for Inexpensive Electronic Commerce, which was presented at the 1995 World Wide Web Conference in Boston, but the project became associated with Compaq after that company purchased Digital Equipment Corporation. The payment system employed symmetric cryptography.