micropayments by ricardo szmit 14/11/1999. micropayments - by ricardo szmit2 overview e-commerce...

Micropayments

By Ricardo Szmit

14/11/1999

Micropayments - by Ricardo Szmit 2

Overview

E-Commerce Today.

The Concept of Micropayments.

Micropayment Uses.

W3C’s Markup for Micropayments.

Electronic Wallet Systems.


E-Commerce Today

Users buy concrete goods using credit cards.

Examples: Books, CDs, toys.

Credit cards are not profitable for small transactions (under U$ 10.00).

Credit card costs (in USA):Merchant discount: 2%

Minimal fee: $0.25, $0.50 or more

Chargeback fee: $25.00


Digital Products

Examples: News, Music, Pictures.

Digital products are provided through:

Free Content.

Subscription.

Advertising.


Free Content

Build market share.

Increase brand awareness.

Encourage users to pay for more complete products.

Problems:

No direct profit.

Used for lack of alternative.


Subscription

Groups of products sold as unit.

Access allowed for period of time.

Problems:

High administration costs.

No impulse buying.

Shared passwords.

Consumers are hesitant to subscribe.


Advertising

Banner ads.

Problems:

Annoyance for users.

Only viable for very popular sites.

Efficacy of ads is decreasing (1 in 200).

Small revenue per view.


Requirements for New Model

Allow users to pay small amounts.

Simplicity (single click).

Security.

Privacy.

Solution: Micropayments.


What are Micropayments?Very small payments made over the Web.

Transactions too small for credit cards.

Can be as little as a fraction of a cent.

Alternative to subscription and advertising.

Can go in either direction.


Scenario

The user clicks on a link requiring a payment.

The browser looks for an "electronic wallet", (a piece of software that acts a like a rechargeable phone card).

The wallet makes a payment for information downloaded.

The wallet keeps track of how much was left, and how much has been spent.


Micropayment Uses

Publishing

Marketing

Software

Entertainment

Web Services


Publishing

Magazines, newspapers, books.

Micropayment allows selling:

Minisubscriptions (days, weeks).

Specific sections of papers.

Magazine articles and book chapters.

Single pictures, cartoons and songs.


Marketing

Vendors can pay to consumers:

Coupons and incentive programs.

Paying for filling surveys.

Frequent user points.

Example: CyberGold.

http://www.cybergold.com


Software

Developers can offer simple products:

Shareware and freeware.

Demo versions.

Upgrades and add-ons.

Java applets.

Source code for libraries.

Allow per-use payment.


Entertainment

Micropayments motivate impulse purchase.

Virtual casinos.

Online gaming:

Pay for game or for time.

Winners can be refunded.

Adult sites:

Preserve anonymity.


Web Services

Public-specific services:

Virtual communities.

Content-specific search engines.

Brokers and meta-services.


The Cost of Information

How would you know what a given piece of information cost?

Links you have to pay for might be marked in a different color.

The browser could show the cost as you moved over the link.

Only when you click the payment is made, and the information becomes available.


Standard Payment Information

We need a standard way to represent payment information for following hypertext links from Web pages.

The browser can interpret this information to:

Show the cost of each link to the user.

Ask the wallet to make a payment.


W3C Goals

Develop a common mark-up language for payment information (standard way for micropayment information to be encoded).

Develop an API (Applications Programming Interface) to enable the browser to talk to the wallet.


Payment per Link

The payment information could include:

The price.

The currency.

The payment scheme.

How to get a wallet for a particular payment scheme.

Information may be "public" or "private" to particular payment schemes.


The API

Provides a standard set of procedures to allow the wallet and the browser to talk to each other.

Is browser and payment scheme-neutral.

Allows different wallets to be selected for performing some payment.

Allows users to download new wallets dynamically.


W3C Working Groups

The Micropayment Markup Working Group:

Produced a specification for the embedding of micropayment information in Web pages.

The Micropayments API Working Group:

Is developing the API to transfer the micropayment information defined in the Web page to the wallet for processing.


W3C Proposal

Common Markup for Micropayment Per-fee-links.

Specification of fields to define payment information (required and optional).

Alternatives for embedding fields in HTML (using OBJECT, EMBED or APPLET element).

Working draft: August 25, 1999.


W3C Architecture

New module: Per Fee Link Handler (PFLH).

Implemented as Plug-in or Java Applet.

PFLH processes the payment information and communicates with electronic wallets.

PFLH functionality and communication with wallets will be defined in other working drafts.


Required Fields

price: amount and currency.

textlink: textual description.

requesturl: product identification.

Payment systems: systems supported.

mpname: system name.

mpurl: system address.


Optional Fields

imagelink: graphical description.

baseurl: absolute merchant URL.

merchantname: merchant designation.

duration: time for multiple retrievals.

expiration: end of offer.

Several others.


Embedding Example

<EMBED src="http://www.w3.org/PFLHPlugin.exe”

baseurl="http://www.shop.com/biography"

merchantname="ShopAndPay”

requesturl="elvis.html"

textlink="Buy the biography of Elvis"

price="+0.01USD"

1.mpname="micropayment"

1.mpurl="http://www.micropay.com"

2.mpname="millipayment"

2.mpurl="http://www.millipay.com”>

</EMBED>


Electronic Wallets

The wallet might come pre-installed as part of the browser.

You may be invited to download a new wallet.

Wallet must be initialized, filling it with cash or credit.

Browser may have several wallets.


Wallet Functionality

The wallet initiates the payment.

May involve a third party payment server.

Wallet are accessible outside the browser:

Check how much money is left.

Check where the money was spent.

Refill the wallet.


Microsoft Passport Wallet

http://www.passport.com

Goal: The wallet store credit card numbers and shipping addresses. It can fill forms automatically, making it easier for customers.

Today 70% of forms are abandoned.

Microsoft wallet does not store money, and does not allow micropayments.

Uses ECML standard.


ECML Standard

Electronic Commerce Modeling Language.

http://www.ecml.org

Partners: Microsoft, IBM, Compaq, Sun, VISA, MasterCard, American Express, others...

Defines standard names for form fields.

Fields include: Credit card information, billing and shipping addresses, etc.


ECML Example

<FORM action="http://ecom.example.com" method="POST">

Please enter card information:

<p>Your name on the card

<INPUT type="text" name="Ecom_Payment_Card_Name” SIZE=40>

<br>The card number

<INPUT type="text" name="Ecom_Payment_Card_Number" SIZE=19>

<br>Expiration date (MM YYYY)

<INPUT type="text" name="Ecom_Payment_Card_ExpDate_Month" SIZE=2>

<INPUT type="text" name="Ecom_Payment_Card_ExpDate_Year" SIZE=4>

<br>

<INPUT type="submit" value="submit"> <INPUT type="reset">

</FORM>


Electronic Wallet Systems

Based on online connections:

CyberCoin (CyberCash).

Semi-online:

Digicash (E-cash).

Millicent (Compaq-Digital).

Stored-value:

Mondex (MasterCard).


Cybercash


Digicash


Millicent


Mondex


Current Status

All veteran micropayment schemes failed.

First Virtual: Closed!

CyberCoin replaced by InstaBuy (MS like).

DigiCash: Only 4 banks (Europe, Australia).

Millicent: Started to work only in Japan.

Problem: Chicken and Egg.


Chicken and Egg

Quoted from:

“So far, every attempt to create a new currency for

the Internet Economy has failed miserably. The

digital-cash business has been plagued by a terrible

chicken-and-egg problem: Consumers won't buy

into new payment systems that aren't in common

use, and without mass consumer participation,

merchants will be indifferent at best.”


New Schemes

OneClickCharge: Prepaid with credit card.

http://www.1clickcharge.com/

Qpass: Aggregated with credit card.

http://www.qpass.com/

Ipin: Charges to ISP bill.

http://www.ipin.com/

eCharge: Charges to phone bill.

Http://www.echarge.com


The Israeli Scheme

Trivnet’s Wisp: Charges to ISP bill.

http://www.trivnet.com

International Sales and R&D Offices

PO Box 18

Shfayim 60990

Israel

Phone +972 (0)9 951-8221

Fax +972 (0)9 951-8223


Future of Micropayments

Micropayments’ benefits are clear:

Increase revenue possibilities.

Motivate expansion of online content.

Allow user-specific digital products.

Current picture may be changed by:

Definition of standards (W3C).

Entrance of big players (MS).


Reference Articles

“Cha Aims Big With Micropayments Service”,ComputerWorld, July 1999

“Digital Cash Is Back”, The Industry Standard, September 1999

“Micropayment Firms Seek New Ways to Cash In”, The Industry Standard, May 1998

“Charging for Online Content”, D-Lib Magazine, January 1998

“Micropayments on the World Wide Web”, J. Martin Devine, December 1998

“The Millicent Microcommerce System”,Compaq White Papers, 1998


Reference Links

Micropayment schemes:

http://www.w3.org/ECommerce/Micropayments/

http://www.cybercash.com/

http://www.ecashtechnologies.com/

http://www.millicent.digital.com/

http://www.mondex.com/

http://www.hrl.il.ibm.com/mpay/

Micropayment pictures from:

http://newmedia.com/NewMedia/97/08/fea/money.html

Presentation template from:

Ahttp://www.presentersonline.com/

micropayments by ricardo szmit 14/11/1999. micropayments - by ricardo szmit2 overview e-commerce...

Documents

concept of micropayments

ricardo szmit9

ricardo szmit11 micropayment

ricardo szmit3 ecommerce

ricardo szmit8 requirements

ricardo szmit10 scenario

credit cards

small transactions