

Ask HN: What are the barriers to micropayments? - crasshopper

A lot of cool things would be feasible if only apps could get a few cents per user. I assume the reason this hasn't happened is neither lack of intelligence nor lack of trying. So what is keeping micropayments from being a reality? Is it the cost of processing payments? Users are unwilling to pay even a few cents? Something else?
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malandrew
Micropayments need to be treated like pre-paid activities like consuming gas
when you drive from one location to another. i.e. the decision to spend money
must be automatic based on your behavior. For example, when I drive to the
store, I do so without ever thinking "it's going to cost me 14 cents in gas to
go there and back. Am I sure I want to go?"

For micropayments to work, consumptive behavior needs to be used as a proxy
for a decision to purchase.

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crasshopper
That's really interesting. Like Amazon Web Services.

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adrianwaj
Transactions costs, minimum payments, infrastructure and complexity. To make a
long story short, bitcoin can do micropayments because the transactions costs
are very low, highly divisible denomination, straightforward addresses, no
definite need for forex, and there is no intermediary financial institution. I
think a framework might need to be laid over the top, however.

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crasshopper
Can you elaborate on that? In particular

\- Why can't aggregators overcome the transactions costs? MoneyGram does so
for remittances from US to Mexico.

\- What's not straightforward about "addresses" ? (Which addresses do you
mean?)

\- Don't intermediaries sometimes lower the overall costs.

Thanks for the thoughtful answer.

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adrianwaj
In principle, anytime money goes through someone else on its way to its
destination for some benefit, purpose or reason, who is going to pay for that
intermediary's existence?

If you need to do a bank transfer to someone, you need their bank account
number, bank name, account name, branch address, branch number, reason for
transfer. A system that needs all this info is a complex system, and that
system needs to be maintained, and that maintenance is by extension costly
(due to its complexity.)

An intermediary might lower overall cost by enabling something to occur that
couldn't occur in the first place, but why couldn't it occur in the first
place? How helpful are bank transfers when they take 3-5 working days?

The banking sector is massively wasteful in my view. Parts might be justified,
but other parts not.

If people are going to hate on bitcoin because they can't buy it, or don't
want it to work (or whatever,) I can hate on the banking sector for eating
time, money and efficiency.

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crasshopper
Thanks for the long response, but it seems sort of far afield and I still feel
my question was unanswered. MoneyGram reduces transactions costs by pooling
wire transfers to Mexico. So they take risk and add value as an aggregator.
What's to keep a micropayment aggregator from doing the same?

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bediger
My guess is that some psychological factors make them impossible to use. Maybe
some combination of that bias where most humans won't wait some time for a
larger reward later, and the amount of effort it takes to keep track mentally
of where you're making a micropayment, and where you're not.

I would guess that the closest analogy would be metered long-distance
telephone time vs flat-rate. I bet that a significant portion of those going
flat rate actually paid more for it than when they were metered.

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fastspring
Processing payments generally involves a minimum per transaction fee that is
often too large a percentage of the microtransaction product price itself to
make it work. As mentioned by another user, Paypal has a relatively new
microtransaction processing service that helps address this problem, though,
so there is some progress, at least for microtransactions of a certain size.

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wmf
Partly psychological:
<http://openp2p.com/pub/a/p2p/2000/12/19/micropayments.html>

Partly technical: You can't do micropayments using credit cards. You can
aggregate payments across sites, but there's a chicken-and-egg problem that
has prevented payment aggregators from reaching usable scale.

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crasshopper
Why can't PayPal do micropayments? Aren't they large enough?

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benologist
They do as of earlier this year:

[https://www.paypalobjects.com/IntegrationCenter/ic_micropaym...](https://www.paypalobjects.com/IntegrationCenter/ic_micropayments.html)

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crasshopper
Word! Well that should be enough momentum to prove / disprove Shirky's claim
that micropayments can't work.

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keeptrying
Where do u micro pay for anything in the real world?

I think micropayment should be a hidden implementation detail. Users should
only have to pay like they do for regular things.

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crasshopper
Micropayments are easier to implement computers and a sophisticated financial
system.

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petervandijck
1\. Psychologically: it takes as much effort to decide to pay 0.01c as to pay
0.99c.

2\. Practically: transaction costs.

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crasshopper
Peter, is that true for non-OECD countries? Many poor Brasilians are on the
Net and 5¢ is not negligible to all those users.

Clay Shirky also mentioned the "psychological cost of deciding" in an article
linked in another comment. But what's the (quantitative) evidence for these
statements?

