What Is a Micropayment?

A micropayment refers to a small online transaction that can be as little as a fraction of a cent.

The specific transaction size that qualifies as a micropayment may vary depending on the payment system, ranging from less than $1.00 to slightly more.

Micropayments are commonly used for immediate online distribution of royalties, gratuities, pay-per-click advertising, freelance jobs on a smaller scale, and cryptocurrency transactions.

The Origins and Vision of Micropayments

The term “micropayment” was coined by technology futurist and philosopher Ted Nelson in the 1960s to describe individual copyrights on online content.

Nelson envisioned micropayments as extremely small amounts, such as a ten-thousandth of a penny.

Such small payments would enable users to pay for online content and contribute to the creation of low-cost networks.

Facilitating Micropayments

Micropayment platforms operate in various ways.

When a seller or payment provider establishes an account with a third-party micropayment provider that handles payment collection, storage, and distribution, micropayments can be facilitated.

Payments are stored in a digital wallet managed by the provider until they accumulate to a larger amount, at which point they are paid out to the recipient.

Prepaid Micropayments

Another method involves a prepaid system, where users set up an account with a micropayment processor and deposit a predetermined sum of money into the account.

When the provider is integrated with an e-commerce platform, users can make small purchases by debiting their account with the provider for the corresponding dollar amount.

In this way, payment is made through a micropayment processing account.