PayPal is setting its sights on micropayments, which facilitate payment services in very small increments, President Scott Thompson told The Associated Press on August 12. The company will deliver a product focused on micropayments before the end of the year, as part of an overall effort to simplify purchasing low-cost virtual goods online—ranging from news articles to virtual items in video games.
Currently, most online merchants require buyers to purchase blocks of credit that typically represent at least a few dollars (or the equivalent in other currencies), but what if a buyer wants, say, a shield that costs 35 cents within a video game? Through its upcoming micropayments product, Thompson foresees making such purchases much more convenient, without forcing to buyers to leave games they’re involved in, or turn away from media that they’re consuming.
“The whole intent is to keep you in the experience—don’t force you to do anything else—and keep it economical for all parties,” he told The Associated Press.
As consumers warm up to the idea of paying small amounts for everything from a song, to an article, to a sword in a video game, PayPal is focusing aggressively on payment services for virtual goods. In an opinion piece in The Huffington Post in July, Sam Shrauger, Vice President of Global Product Strategy for PayPal, said that consumers are rapidly becoming more attracted to such goods.
“Prior to the Internet's emergence, literally every content value chain was characterized by high barriers to entry and the need for massive scale in both the creation of content and its distribution,” said Shrauger. Micropayments exist at the other end of that value chain.
Last year, $2 billion of PayPal’s payment volume came from digital goods, and Thompson said that the company has already processed $1.3 billion in digital goods purchases thus far this year, so the trend is on the rise. While PayPal has offered merchants some products and services for micropayments before, the upcoming product is expected to be much easier to use, and very economical for merchants.
PayPal’s Thompson also recently discussed other aspects of the company’s vision and strategy with media outlets. He talked about check-friendly and charitable upcoming enhancements to PayPal’s iPhone application with TechCrunch, and said that “all the innovation is embedded in these product launches,” in a talk with the Financial Times.
On October 26 and 27 in San Francisco, PayPal will unveil several other innovations at the PayPal X Developer Conference: Innovate 2010.