In recent months the attention to mobile traffic and the focus on emerging markets among digital marketers in adult entertainment and many more mainstream industries has become palpable. While many have chased $20-30 per month recurring join fees since the web began, forward thinking business owners are offsetting revenue reductions caused by chargebacks or prepaid credit cards by exploring new payment options that turn seemingly small amounts per transaction into an even better ROI in the aggregate, making micropayments a very big deal.
Payment processors who have been receiving numerous requests from clients for micropayment services are quickly answering the market shift by adapting to the complexity of handling higher transactional volume from far more varied sources than traditional payment methods.
Because micro-payments online are typically funded by credit or debit cards, the cost for smaller merchants may be too great considering the transaction fees and percentage that a merchant must pay for each micro-transaction. -Mitch Farber, president and CEO of NETbilling Inc.
“Now, micropayments are important,” said Andy Khawaja, CEO of GTBill. “We are currently innovating towards a solution that offers a simpler, cost-effective way to support micropayments. We’re excited to offer the world a system for micropayment s that contributes to the growth and stability of e-commerce.”
As with many aspects of the technology and entertainment business, micropayment adoption may have been primarily driven by Apple, and their wildly successful ecosystem allowing impulse purchases across many different device platforms with a single click.
“Micropayments have begun to be used very successfully for online purchases under certain models. iTunes is the largest example of this,” said Mitch Farber, president and CEO of NETbilling Inc. “However, because micropayments online are typically funded by credit or debit cards, the cost for smaller merchants may be too great considering the transaction fees and percentage that a merchant must pay for each micro-transaction.”
That transactional cost is exacerbated if the merchant is considered to be operating in high-risk markets and at least for now, the solutions available are less than optimal.
“The semi-solution for this is for merchants to sell larger blocks of tokens, where a transaction amount may be $20 for example, held for the customer to use later for micropayments,” Farber said. “This solution works well for customers who are loyal purchasers but does not work well for new customers or fly by customers as it makes them commit to a larger amount based on future purchases which they may not plan on making at the time. Until the card associations introduce a truly reduced micro-transaction discount rate for merchants, these issues will remain.”
Another similar solution may be aggregation services like online stores that allow the sale of a single-video scene, full-length movie or trial membership at a micropayment purchase price in order to achieve the scale necessary to overcome the obstacle caused by the high transaction fees a merchant must pay as a percentage of the consumer sale price.
In September of this year, the Pew Research Center reported that the average price of a smartphone has fallen from $443 each just two years ago to $372 this year and that technology market - research firm International Data Corp. expects the average selling price of smartphones in India to fall below $200 by the end of this year.
These numbers and the trends of the last few years suggest that in a very short period of time from now, the largest potential consumer base for entertainment products online will be a massive influx of people with mobile devices, lower income thresholds and a far greater thirst for adult content than their stale counterparts in existing markets.