Glossary

Micropayment

Easy

A micropayment is essentially a small transaction that is carried out online and can be as small as a fraction of a cent.

What Is a Micropayment?

A micropayment is essentially a small transaction that is carried out online and can be as small as a fraction of a cent. Now, depending on the payment system, a micropayment can also be defined as any transaction size which is less than $1.00 or more. These have been known as a way to better facilitate the immediate online distribution of royalties, gratuities, pay-per-click advertising, freelance jobs of a smaller scale, as well as cryptocurrency transactions. 

When it comes to the term itself, "micropayment" was coined by technology futurist as well as philosopher Ted Nelson throughout the 1960s as a way for individual copyrights on online content.

He had envisioned micropayments in the neighborhood of ten-thousandth of a penny. This small size would in turn allow users to pay for online content and allow for the creation of low-cost networks as well. 

When it comes to the platforms built for micropayments, they work in numerous ways.

Once a seller or a payment provider has an established account with a third-party micropayment provider that collects, stores as well as distributes the payments made, using micropayments becomes a possibility. Through a digital wallet that is managed by the provider itself, payments are stored until they actually accumulate to a larger amount, where they are then paid out to the recipient. 

Then, you have the method which implements a prepaid system. Here, a user sets up an account with a micropayment processor and pays an average or large sum of money into the account itself.

When the provider is also used by an e-commerce platform where the user can make a small purchase, the user's account with the provider can easily be debited for the dollar amount of the purchase. This means that the user makes payment through a micropayment processing account.