PayPal to make micropayments easier

PayPal wants to make it easier to buy low-cost digital goods online, whether it is a single article on a news website or virtual items in a video game.

Scott Thompson, the online payment service's president, said Thursday that PayPal plans to roll out a payment product by the end of the year that helps businesses collect "micropayments" on the web.

Generally, if you want to buy, say, a virtual sword in an online game, you need to first purchase a chunk of credit - perhaps US$5 or US$10 - that you can then spend on a 49-cent virtual sword on a game on Facebook or other websites.

That is because the costs associated with credit card transactions quickly eat away at the profit a merchant would make on something that costs a few dollars or less.

Thompson thinks consumers want to be able to buy items one at a time, though. And with this in mind, he said PayPal intends to allow purchases in small increments.

PayPal, which is owned by eBay Inc, plans to make that work by compiling consumers' transactions.

Someone might buy US$10 worth of news articles, or goods in an online game, before getting billed by PayPal. PayPal thinks this will appeal more to consumers while benefiting merchants and PayPal, too.

PayPal is already involved in the digital payment space. Last year, US$2 billion of its total US$71 billion in payment volume came from digital goods such as downloads of music, videos and software people bought online.

And it seems to be growing: In the first half of this year, the company processed US$1.3 billion in digital goods payments, Thompson said.

The company has got its feet wet in the world of micropayments, too, offering merchants a micropayment option that websites can use, charging a fee of five per cent plus five cents for small transactions, which it sees as generally less than US$10 apiece.

This way, a US$3 micropayment for a news article would cost the merchant 20 cents in transaction fees; under PayPal's normal fee schedule for items that cost up to US$3,000, it would cost about 39 cents.

- AP