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PayPal Develops New Micro-Transaction Payment Strategy

Company wants to replicate the user-friendly process of "putting a quarter in a coin slot"

Oct 27 2010, 3:12pm CDT | by

PayPal Develops New Micro-Transaction Payment Strategy
 
 

PayPal has developed a new system for payments that it describes as the "online equivalent of dropping a quarter in the slot" of a video game or newspaper machine. It aims to integrate digital payments into online environments in the most seamless way that's ever been done.

It's a tall order, but if it succeeds it could bring more relevance to the country's far-and-away leader in online money transfer services.

While PayPal is popular among people for sending money to friends or buying products on Ebay, when it comes to micro-transactions like buying an upgrade on World of Warcraft or signing up for a subscription service at a website, standard credit card transactions are king. That's the area PayPal is now targeting.

The process of integrating PayPal into micropayment infrastructures will be three-fold: PayPal needs to update its system to allow for simpler ways for third-parties to access its authentication servers, content providers need to update their internal premium service payment systems, and consumers will need to be more active about using PayPal for more incidental purchases.

For PayPal and the content providers, there's a financial incentive. Obviously, it'll bring in more in payment processing fees to PayPal, but promises to charge less per transaction than the standard credit card provider. For users, the value proposition will come in having a universal way to pay for content - without needing to break out the wallet and punch in a credit card number.

"The decision to purchase digital goods and content usually happens on impulse, so the act of paying needs to be as quick as that impulse. PayPal for digital goods is an ideal solution for game developers, newspapers, bloggers, media companies, and anyone who is looking to monetize premium digital content around the globe," said PayPal VP Sam Shrauger in a statement.

In addition to simplifying the process of micro-payment transactions, PayPal wants to continue encouraging users to use the service for global payments - so a content provider in Asia can accept payments from the US without jumping through any extra hoops.

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