What makes a micropayment solution succeed?

(see the full report at http://home.kniberg.com/henrik/thesis/)

A micropayment system, in the context of this report, is defined as a system that is designed to handle payments as small as €1 or less. There are a number of such payment systems on the market today such as PayPal, Paynova, and i-mode. There are also a number of payment systems that have disappeared such as Beenz and Millicent, and there are most certainly a number of new payment systems being developed by companies worldwide.

The purpose of this report is to identify the key factors determining the success or failure of a micropayment system. Through analysis of the differences between normal payment systems and micropayment systems a hypothesis was formed, stating that the most important characteristics of micropayment systems are ease of use, pervasiveness, fixed transaction cost, and transaction speed.

Over 120 differing payment solutions were found through market research, mostly using Internet sources. These were classified into the subgroups electronic check, buyer-initiated bank transfer, merchant-initiated bank transfer, prepaid merchant account, prepaid merchant voucher, invoice, and payment relationship sharing.

An analysis was carried out focusing on those payment systems that represent success stories such as i-mode and PayPal, and those that represent failure stories such as Beenz and Millicent. A number of interviews were also carried out with relevant companies in Stockholm, Tokyo, and San Francisco. The following conclusions were reached: