PayPal Opens Up its MicroPayment Solution

Two days after Visa announced its acquisition of PlaySpan, PayPal today opened up its micropayment solution to publishers, game developers or anyone else who wants to monitize their online content.

The benefits of PayPal's micropayment solution, compared to traditional payment options, is its two-click, 'frictionless' convenience and tailored pricing structure. 


For publishers  that are looking to monetize their content, the main challenge of converting sales lie in getting customers to go through the full payment process, particularly as this requires them to interrupt their online experience to make a payment.  PayPal's micropayment solution, is frictionless, in that it enables the customer to complete the payment without leaving the content with which they are engaged.  Autosport.com, the online magazine, was part of PayPal's early release and saw a 75% increase in sales after implementing the micropayment system.

A second challenge in making a micropayment system work, lies in getting the pricing structure right.  Due to the fixed price element that most payment networks apply to small transactions, these have proven prohibitively expensive to merchants.  PayPal therefore implemented a micropayment-specific pricing structure - for transactions of less than $12, PayPal charges a flat 5 cents plus 5% of the transaction amount.

Thanks to PayPal and other micropayment solutions of this kind, we should therefore expect our favourite online newspapers and entertainment sites to increasingly look to charge for premium content.

Visa Acquires PlaySpan and Takes a Bite of the Digital Goods Market

Visa yesterday announced its acquisition of Silicon Valley based PlaySpan, a payment processor in the digital goods space.  Visa will pay $190 million cash, plus an additional performance based element.

So what are digital good; these are products or services that are purchased, delivered and consumed in its digital form.  Most common examples are software, music files, online movies and e-books.

Although these categories are experiencing rapid growth, the most exciting category are purchases made on social networks or within online games.  This has become an incredibly attractive space where PayPal has taken an early lead.

PayPal launched micropayment solution last year, with a number of high-profile partners onboard, such as Facebook, the FT, Autosport and Justin.tv.  What sets PayPal’s solution apart is its frictionless, two-click convenience and open APIs that enable merchants to customize the solution to their needs and easily integrate with their systems.

Importantly, micropayments also require a different pricing structure, as the traditional structure is not economical for smaller payments.  PayPal has therefore introduces a different structure that reduces the fees from a $1.00 transaction from $0.33 to $0.10.

And it is exactly this that PlaySpan provides to Visa.  Like PayPal, PlaySpan has developed a frictionless e-wallet that enables consumers to complete transactions across social networks and online games without interrupting their online experience.  It also operates with open APIs, so that merchants can easily integrate the PlaySpan with their application. 

Within four years to launch, PlaySpan is already the number two company in this space, with 28 million users, only after PayPal with its 80 million users.

As TV producers, online game developers and mobile operators increasingly seek to monetize their content through digital goods and micropayments, PlaySpan’s market potential is rapidly expanding.  This acquisition could consequently provide Visa access to entire new markets.  Let’s see how other networks such as MasterCard, American Express and Discover respond!