Why is it so hard to create a micro payment system?

Its with great sadness that we see BitPass join the long list of admirable (but failed) attempts of cracking the micro payment market.

BitPass raised a total of $13M in two rounds of financing, most of it in September 2004. The investors included Worldview Technology Partners, Steamboat Ventures (the venture capital arm of The Walt Disney Company), RRE Ventures, and others. It also had a stellar slate of directors: James Robinson III, former chairman and CEO of the American Express Company and a general partner at RRE Ventures, Peter Goettner, venture partner, Worldview, and John R. Ball, managing director, Steamboat were on the board.

Over the years we have seen so many companies try different models and the failed mainly because it is so hard to get people sign up.

If one thinks about it, the phone card companies are already using the “micro payments”; after the initial purchase of the card, subsequent calls can cost just pennies and those transactions are handled very accurately. So clearly the technology exists. We also know that the transaction cost is minimal, certainly much much less than a penny each, so the only thing needed is a way to get the initial deposit going.

In this environment, Google is probably the only company that can take-on this challenge and succeed.

The mobile carriers can also succeed if they focus on the task but I doubt that they will take this on; they are too busy trying to gouge extra money from the customers rather than looking at the next big opportunity (most mobile carriers raised their fees for text messages, even though it is getting cheaper for them to provide that service.) Instead of trying to make text messages do more things, they want to make the use of text messaging so expensive that it practically useless. There are companies trying to use text messages to offer authenticated transaction, but by making the transaction cost even higher than the cost of using a credit card, the incentive for the merchant and customer to use SMS completely disapperas. I want to be able to buy a Coke using SMS, but not if it is going to cost extra $0.50 to do it.

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One Response to “Why is it so hard to create a micro payment system?”

  1. By Sammy on Feb 4, 2022 | Reply

    The problem might be lack of demand. According to the CEO of Cyber Cash, they built the system but had to close down US operations and will not revive it until the market is ready.

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