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