Page 358 - Introduction to Electronic Commerce and Social Commerce

11.4 EC Micropayments 345

Figure 11.3 Singapore
electronic road pricing system.
(Source: Photo taken by J. K.
Lee March 2013)

point of view, there is substantial evidence, at least in the off- better suited for off-line payments than online payments,
line world, that consumers are willing to use their credit or although there is nothing that precludes the application of
debit cards for small-value purchases. In the online world, any of the models to the online world. The models include:
the evidence suggests that consumers are interested in mak-
ing small-value purchases, but not with credit or debit card
payments. A good example is Apple’s iTunes music store • Aggregation. Payments from a single consumer are
and their App Store. There have been more than 35 billion accumulated and processed periodically (e.g., once
songs downloaded from iTunes (Lee 2014) and over 100 bil- a month), or as a certain level is reached (e.g., $100).
lion apps downloaded from their App store (Statista-1 2015). This model fits vendors with a high volume of repeat
A substantial percentage of the songs that were downloaded business. Both Apple’s iTunes and App stores use
cost $1.29 a piece, while many of the apps cost somewhere this model. The transportation card used in Seoul,
between $.99 and $5. Although most of Apple’s customers Korea, and many other places is of this nature.
paid for these downloads with a credit or debit card, the pay- • Direct payment. In this case, an aggregation is
ments were not on a per-transaction basis. Instead, their cus- used but the micropayments are processed with an
tomers created accounts with Apple, and Apple then existing monthly bill (e.g., a mobile phone bill).
aggregated multiple purchases before charging a user’s credit • Stored-value. Funds are loaded into a debit account
or debit card. from which the money value of purchases is
Other areas where consumers have shown a willingness deducted when purchases are made. Off-line ven-
to purchase items under $5 using a credit card are cell dors (e.g., Starbucks) use this model, and music-
phone ringtones, ring-back tones, and online games. The download services use variants of this model. This
annual market for ringtones and ring-back tones is in the system is being used by several online gaming com-
billions of dollars. The download of both types of tones is panies and social media sites.
charged to the consumer’s cell phone bill. Similarly, the • Subscriptions. A single payment (e.g., monthly)
annual market for online games is in the billions of dollars. provides access to content. Online gaming compa-
Like songs and tones, downloading a game is usually nies and a number of online newspapers and jour-
charged to the consumer’s account, which is paid by a nals have used this model.
credit or debit card. • À la carte. Payments are made for transactions as
Currently, there are five basic micropayment models that they occur; volume discounts may be negotiated.
do not depend solely or directly on credit or debit cards, and This model is used in stock trading, such as at
that have enjoyed some amount of success. Some of these are E-Trade.