Micropayments: The Final Frontier For Consumer Payments
James C. McGrath of the Payments Cards Center of the Federal Reserve Bank of Philadelphia has published a new discussion paper titled "Micropayments: The Final Frontier For Consumer Payments" (pdf). The paper concludes that,"despite some structural limitations, the existing payment card infrastructure and related products are likely to be the primary vehicles for electronifying micropayments in the U.S. in coming years."
A number of recent innovations — both new technologies and new ways of doing business — have done much to make electronic transactions of under $5 less expensive and more convenient. Now, having proven themselves in several online markets, such “micropayments” are poised to make inroads at the physical point of sale. This paper looks at some of the success stories, both in the U.S. and abroad, to identify possible conditions for success. It finds that industry structure, the coordination of standards, and customer preferences and experiences have all influenced the development of these products.
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