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Evaluation of micropayment transaction cost

Papaefstathiou Ioannis, Manifavas Charalabos

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Summary

Electronic money, in general, is used for trading over electronic channels such as the Internet, or mobilenetworks. Micropayments, in particular, can be used for the purchase of low value intangible goods (i.e., nonphysicalassets like data and information). For these products, the use of payment instruments like on-line creditcards tends to be more expensive than the actual product. For this reason, a micropayment mechanism needs to keepthe cost of the individual transaction low. There are many factors that contribute to the cost of running such a systemand they come from the different disciplines that are involved in an electronic-payment (e-payment) system.Therefore, in order to design an efficient micropayment mechanism it is very important for the designer to considerand minimize each of these cost factors. In this paper, we identify the most interesting of the technological factorsand we present ways to minimize them. We argue that one of the main reasons that the micropayment systems havenot been widely used yet is that their cost has been forbiddingly high; this is probably due to the fact that there arecertain cost factors that have been undervalued by the majority of e-payment developers.

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