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PayPal Helps Out Online Retailers With Micropayment Change

22 April 2010 - 09:26 by Simon Crisp

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Micropayments have been something of a sore point for many in the e-commerce industry. Historically, the problem has been that when customers make purchases as part of their safe shopping online, the retailers themselves have been charged for each separate transaction that takes place. This has prevented some retailers from selling many low value items as the processing costs have rendered their sale simply uneconomical.

However, this aspect of the safe shopping online world is about to change and seemingly for the better. Online payment service PayPal, already used by thousands of online retailers, is making an adjustment to the way in which it handles micropayments made by debit or credit cards. The online payment service will now actually aggregate micropayments-anything from less than one US dollar through to $12- with retailers being charged a single fee for bulk micropayments, instead of per transaction handled.

This news is bound to be warmly received within the online retail community, particularly by those for whom the old system of handling micropayments was something of a barrier to profitability. Retailers such as publishers, for example, are set to benefit from the PayPal change, since they may want to sell articles from newspapers or magazines for modest sums online, but thus far have not found an economically sound method of doing so. Now, if the publisher is involved in the business of selling novels, they could potentially improve profitability by selling individual chapters of those novels in taking advantage of the new micropayment system.

Firms who already use micropayments, such as online gaming companies and ringtone vendors, will also benefit, while experts believe that the move by PayPal will allow new, low value transaction businesses, previously held back by the micropayment system, to emerge.