A widening gap
In an era where digital purchases and physical purchases made digitally are rapidly becoming the norm, the need for an efficient and economically viable micropayment system is more apparent than ever. Products and services, both digital-only and physical-with-digital, can be sold in bite-sized amounts, but the ability to buy them with micropayments is lagging. For example, how common is it to buy a single online NYT news article for a few cents or even today’s WSJ edition online for a few dollars?
The gap between the opportunities to sell new digital products or in new ways using digital services and the ability to buy them using a suitable payment method is widening. For example, individual content providers such as bloggers (text and video) can monetise their content only if they use platforms such as Substack or Youtube, which require subscriptions, locking out large numbers of occasional users, or users are bombarded with unwanted adverts. These examples are just the tip of the iceberg – others include bottle returns, parking-by-the-minute/hour, on-demand-music, pay-as-you-go motor insurance and many others that have yet to surface without a viable micropayment solution.
Traditional Payment Networks are Struggling
Existing payment networks, driven by legacy mechanisms such as domestic Automated Clearing House (ACH) and card networks, have struggled to address this growing demand. These traditional systems were designed at best to process tens of thousands of transactions per second, reflecting today’s needs. However, they falter when faced with the scale of micropayments, which require hundreds of thousands of transactions per second. In addition, micropayments remain commercially unviable on these networks due to high minimum fees. For example, minimum debit card fees are typically at least 25 cents per payment. As such, any payments below $25 are expensive for retailers and the lower the payment value, the more expensive they become, with fees eating into revenue.
Closing the Gap
A revolutionary approach is needed to solve this problem. A new global open micropayment network is required that is implemented and governed locally by country. Global because the digital economy is borderless with global reach, open because it needs to be usable ubiquitously and unconditionally by anyone. The network has to be an order of magnitude cheaper to operate than today’s card and bank systems, which do a great job for higher value payments but are unsuited for digital business models. Such an approach allows the network to cater to local market needs while ensuring compliance with country-specific regulatory requirements. The result? A system that evolves business models beyond that of current ‘payment moats’ established by tech giants who are limited to subscription pricing models due to the absence of a micropayment network.
However, is anyone taking this approach?
Crypto Misses the Mark
Crypto-currency solutions have tried and so far failed, even with innovations such as the Lightning network – as a unit of account BTC is acceptable to enthusiasts, but how viable is it for pricing goods and services for the masses? Stablecoins such as USDC and USDT show promise, but there are also PYUSD, BUSD, TUSD and more – how can there be mass adoption with such a confusing array of options for the same currency? Additionally, native crypto-currencies and stablecoins are designed to work with self-custody wallets where access to funds is lost forever if the wallet password is lost – surely a non-starter for everyday users. Especially since AI self-custody wallets risk exposing user privacy on a mass scale for others to exploit – transactions on blockchains such as Ethereum are visible publicly, including to AI applications that can combine data originating from self-custody wallets with personal social media data in real-time.
Crypto networks also lack the standards and interoperability required in a payments network to keep all participants operating to common rules, providing common, consistent outcomes and trust in the network.
Blockchains for Settlement
A commercially complete solution is needed with a network that integrates a peer-to-peer payment scheme with a robust governance structure and operational framework. It has to go beyond providing just a technical solution that is technologically robust. It must be organisationally sound and aligned with best practices.
Crucially, it must be very low cost with enhanced programmability to enable new ways of selling and buying through new digital business models. This points to using blockchains for the underlying settlement infrastructure, but only those with very low and fixed fees (< $.001 per txn). There is no need for users to have any understanding of stablecoins or digital assets to make use of the system and their wallets must be non-custodial, i.e. their wallet provider handles all blockchain interactions and custody of digital assets, protecting user privacy and their access to their funds.
Yet, the network must offer an inclusive financial ecosystem accessible to all users, regardless of their level of expertise in digital assets. This is a significant shift from many existing platforms that require a high level of knowledge and understanding to navigate.
Moreover, the network must offer permissionless access. This means that anyone, be it content creators, developers, small value good resellers, or other users, can obtain a wallet and transact on the network without authorisation or sign-up. This democratises access to the micropayment system and fosters a more inclusive digital economy. Another distinctive feature is openness. A network can be interoperable with other networks only if they all use the same scheme rules. This means that different networks can interact seamlessly with each other, breaking down barriers and promoting efficiency in the digital economy.
pingNpay to the Fore
pingNpay is one new network taking this approach. By creating a micropayment system that is commercially viable and accessible to all, pingNpay is unlocking new opportunities for individuals and businesses alike. Focusing on local implementation and governance will transform the micropayment landscape globally.
A new, revolutionary approach to micropayments could be the dawn of a new era for the digital economy. Digital innovation has made ordering a Starbucks coffee on my iPhone effortless. It’s high time the same ease was applied to purchasing today’s FT online.
There is enormous potential to transform the micropayment landscape globally, making small, high-frequency payments a viable option for connecting content creators, developers, and small value goods retailers with banked and unbanked consumers. pingNpay is here to do just that.
For a more detailed understanding of pingNpay’s transformative approach to micropayments, please read www.pingNpay.com. #micropayments #fintech #thoughtleadership #pingNpay #DigitalEconomy #FutureOfPayments