

Ask HN: Best Micropayment Service - Husafan

I am brainstorming ways to monetize a chrome extension/firefox plugin and a simple donate button came to mind. I would love to hear from the community about the best micropayment systems out there. Also, any advice on the best kind of for-profit organization (LLC?) to form for this situation. Thanks!
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patio11
People mean a lot of things when they say "micropayment." You might mean $0.05
or $5.00. If you mean $5.00, the best solution is Paypal (or Stripe if you
live in the US). If you mean $0.05, stop now.

Tips:

1) Don't call anything a donation if you're not a registered 501c tax exempt
charity. (You won't be.) Instead, let people buy a supporter button on your
home page or a "registered" version of the software with whatever trivial
difference you want. (e.g. displays "registered" or "Thank you!" in the about
screen.) This is a preventative inoculation against lots of trouble down the
line with your credit card processor.

2) If you don't have a specific reason for forming the LLC, skip it and take
money as an individual. Many devs have an inchoate fear that this is somehow
illegal. That is the opposite of the truth: sole proprietorship is
overwhelmingly the most common form of business operation in the US.

3) Do not encourage people to pick their donation amount. Instead, pre-pick
three, which you can assign three levels of status to (bronze, silver, gold,
whatever -- you and I know it is meaningless, but the customer won't perceive
it that way) and price them at modest, generous, and high. e.g. If you are
thinking $5 right now, I would suggest $10, $20, $30 or $10, $25, $50. You'll
get most of your transactions at silver and make most of your money on gold.

~~~
GFischer
Hi patio, I'm working with some classmates on a micropayments startup, and
we're looking at solving the $0.05 side, so I'm really interested in knowing
why do you advise people not to?

I live in Uruguay, $0.05 is a very common amount ("un peso").

~~~
patio11
I would strongly advise rethinking starting a payment processor as a student.
It is relationship-, credibility-, and capital-intensive. It also requires
truly massive scale before being worth any money. ( _Incredibly_ massive scale
in micropayments. If you make $0.01 off each transaction you have to
facilitate _hundreds of thousands a month_ just to pay for the founding team's
ramen. If you somehow possess the magic that you need to find 100,000 paying
customers you shouldn't end up eating ramen!)

There are basically two ways to do five cent transactions. The first way is to
buy a virtual currency for a non-micropayment amount (e.g. $5 or $25) and then
subdivide that virtual currency into infinitely divisible bits which you can
spend seemlessly within the application. This is the successful, Zynga-esque
way to do micropayments, and it sits nicely atop the legacy payment
infrastructure, which is entirely suited to doing $5 or $25 transactions.

The other way, where you attempt to make an actual transaction for $0.05, is
an operations nightmare. The legacy payment system is fundamentally not
equipped to handle it. The conversion rates to purchases will be terrible,
because of the "penny gap" (asking people to spend money, and in particular
asking them to make a new relationship to spend money, always causes a huge
dropoff) and the conversion rate _will not be meaningfully higher than if you
had charged $5_. Customers hate the experience of authentication for $0.05
transactions _even more than they hate actually paying money_ , and common
schemes for doing the auth once and then bundling transactions across
merchants like e.g. Flattr are basically a non-starter for most users.

(I'm largely speaking about making services for the global rich here. It is
possible that the situation in Uruguay is different, although I'd still
suggest not getting into this field as a student.)

~~~
GFischer
Thank you for your advice Patrick, I should have added I'm a Masters of
Management of Technology student with 8 years of experience in the field, my
cofounder is a manager at a payments processor :) , and I've worked in the
local financial sector as well (Equifax and currently at an insurance
company).

We're specifically NOT targeting the global rich, 2/3rds of the population
here in Uruguay don't have a credit card and are left out of internet
payments, and the same or worse happens across Latin America (the so-called
"Base of the Pyramid" approach
<http://en.wikipedia.org/wiki/Bottom_of_the_pyramid> ).

I do worry about legal implications, the virtual currency approach is probably
what we'll end up implementing not only because of the payment infrastructure,
but because of legal reasons as well.

We've met with the legacy payments structure (to get money into the system)
and the response has been largely positive, but we're facing some serious
challenges in not having more overhead than that.

By the way, if we found 100.000 paying customers and made 0.01 off each
transaction that would be a 50% raise for both of us :) , that's how low we're
being paid at the moment. And we hope to make money off the financial market
as well (off the time between the money entering the system and the money
leaving the system), which is how my current company makes money.

Does it sound reasonable or is it still a pipe dream? We still need 100.000
more customers, but we teamed up with a nonprofit to get the first 2000.

~~~
swah
Are the folks without credit cards on the internet?

~~~
GFischer
At least here in Uruguay, the answer is yes.

Don't only think of the classic "poor", think of: \- people earning 500
dollars/month (lower middle class here) which Visa and Mastercard don't accept
as customers;

\- young people (under 18 or 20) and women (that's A LOT of people);

\- people in informal work agreements (that's 1/3rd of the population here),
black and gray market, which cannot demonstrate their income and avoid taxes.

------
thaumaturgy
WePay (<https://www.wepay.com/>) is a YC alumni company that seems to be doing
well as a sort-of alternative to Paypal. Paypal can be fickle; if you never
have trouble with them, they're convenient and easy and everyone knows who
they are so you don't have to worry about convincing people that it's OK to
use them. On the other hand, there are a _lot_ of Paypal horror stories.

~~~
GFischer
They have a 50c minimum, is it really micropayments?

Sounds good :) and the fees are very reasonable (3.5%)

------
GFischer
Hi Husafan, I'm working on a micropayments startup, we're not operational
right now, but I researched a lot of alternatives :) so I'll list some:

BuySimple <https://www.buysimple.com/> is the one I liked the most (and the
one most similar to my own service)

There are a lot of SMS micropayments services with a very high per-transaction
cost:

<http://www.daopay.com/?language=es>

<http://www.boku.com/>

<http://zaypay.com>

A trade website:

<http://www.thepaypers.com/>

Other stuff I haven't tried:

<https://checkout.google.com/inapppayments/>

There are dozens of others

------
petervandijck
By far the best: Apple's app store.

