February 13, 2003, 12:00 AM

How micropayments will create a market for microservices--and vice versa

It’s the old chicken-and-the-egg question: Which comes first--micropayments or online products and services that carry microprices? The answer, according to SRI Consulting Business Intelligence, is: Both.

It’s the old chicken-and-the-egg question: Which comes first--micropayments or online products and services that carry microprices? The answer, according to SRI Consulting Business Intelligence, is: Both.

“Low-cost service offerings and micropayment systems will reinforce each other,” says SRI’s “Mobile and Micropayments: Changing the Nature of Commerce” report that came out just this month. “As soon as the first successful micropayment systems enter the stage, low-cost services will spring up, in turn boosting the use of micropayment systems.”

SRI defines micropayments as payments under $10. Such payments usually are not cost effective for credit card payment because of the fixed fees on most credit cards.

SRI predicts that successful micropayment systems will result in the unbundling of services, such as consumers buying a single article of interest rather than a subscription to a magazine; creation of disposable services, such as download of electronic games that consumers play once and discard; and the fragmentation of other services and products, such as an individual selling information in a particular area of expertise.

For any micropayment system to succeed, it must be easy for consumers to sign up, low cost, secure and compare favorably to the current financial infrastructure, SRI says.

SRI cautions retailers not to wait to establish microservices. “Existing service strategies will without doubt play a major role in the future. But the new payment systems will enable new forms of services and address more granular market niches. Companies will have to use the remaining time to develop viable strategies that will build a solid competitive position in the future market environment and to develop a clear understanding of their place in the value chain for future service offerings,” SRI concludes.

 

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