You’re standing on the platform listening to an announcer make excuses about why your train is late. When you eventually board, it’s packed and you have to stand. Are you annoyed?
No – because with every single minute of delay and disappointment, you get a small refund automatically sent to your bank account.
Take a seat when you didn’t reserve one, and the cash flows in the opposite direction. As the value of the journey changes, the amount you pay does, too. This concept of micropayments – of paying for exactly what you get – may one day be applied to almost every aspect of our lives.
Museums could charge according to how long you stayWhat are micropayments?
Micro-payments are, simply, the ability to pay anyone, anywhere, and for no fee. Perhaps the most famous example of the early micropayment movement is the Venmo app.
Started in 2009 and beloved of penny-pinching students collecting money from each other for pizzas, beer and taxi fares, Venmo allows for small monetary calculations and exchanges.
And it’s a small sign of things to come. With our lives slowly becoming digitized, automated and streamlined, tiny reconciliation charges will soon be possible; a Wi-Fi hotspot could charge you by the second, adjusting the cost according to the actual speed you get, while a museum or art gallery will be able to charge you according to how long you spend inside.
If it’s raining outside, it could double the charge.
You could also be charged for exactly how long you park in a car parking space, how long you stay in a coffee shop, or how long you spend watching in-flight entertainment. Sports teams could introduce ticket prices based on the result of the match (although that opens a whole new world of possible issues).
All of this would rely on all kinds of connected technology, but the possibilities of what it could enable are so vast they’re almost unthinkable right now.
Popularizing the concept
Let’s be clear: the above scenarios are a long way off, but embryonic micropayments already exist on the internet, as well as in the form of in-app purchases.
“Online businesses like Japan’s Hangame have been successful by letting users play for free, and just charging them a fee to customize their in-game avatars,” says Stuart Thornton, VP Business Development APAC, Worldpay.
“These impulse-driven micropayments add up quickly.”
South Korea’s Nexon Corp. attributes all its profits to in-game micropayments – and it’s valued at $266 billion (roughly £205 billion / AU$348 billion).
So micropayments are big business already, but in future they’ll popularize new forms of payment. “We will see micropayments become more aligned with cryptocurrencies like Bitcoin, which are virtual, instantly transferrable, and allow users to mask their personal details,” adds Thornton.
Some doubt the credibility of the wildly fluctuating value of Bitcoin, but that’s not stopped Bitcoin ATMs spreading throughout the world.
Internet-based news – including this very page – is paid for by advertising, but ad-blockers are currently bankrupting small publishers and concentrating power in big conglomerate publishing platforms, all because people don’t like adverts.
That’s not massively surprising, since online advertising is not well targeted and is still (at best) little more than a digital version of a magazine advert.
Cue a new way of paying for what you consume online. The theory is that each additional minute you read a web page for, the more value you get out of it, so the higher the micropayment you would make.
Amazon is already producing statistics on exactly how much of books people read, so it could be applied to publishing as a whole, but the whole idea needs automating.
In future, eye-tracking technology via webcams could help produce ‘heat maps’ of webpages to create even more highly-targeted payment (you wouldn’t have to give money for something you didn’t look at); but for now, a new browser is needed that monitors what you read, and rewards the creators.
Trains could charge according to how much value you receive. Credit: BombardierBrave move
The Brave browser is well named, for it tries to not only improve the relevance of advertising, but to monetize online behavior in favor of everyone involved.
Using Bitcoin-based wallets BitGo and Coinbase, Brave then gives the reader 15% of the ad revenue. Brave keeps the same amount for itself and the provider of the ad, and the rest goes to the host website; publishers get paid in real-time micropayments. Everyone’s a winner.
“Online advertisers have been exploiting user data for years without consent… It’s no wonder that 200 million users worldwide have adopted ad-blocking to defend themselves,” says Eich.
“Users can now fight back and keep their data private and defensible on their devices, while still supporting the content they wish to view via micropayments.”
Enter the blockchain
If browsers like Brave do take off, it would be at the expense of the likes of Google AdSense, which is probably the most dominant micropayment system around at the moment.
Meanwhile, brands like PayPal and eBay are beginning to offer fee-free transactions below a certain amount. Why? They don’t want to be swept away by charging for something other services offer for free, through using an incoming payment system that has the tech world salivating: the blockchain.
Airlines could charge for in-flight entertainment by the minute. Credit: PanasonicWhat lies beneath
The enabling technology that would allow all these micropayments to happen would be the blockchain LINK, which is seen as a ‘foundational technology’ of Web 3.0.
A blockchain is the secure ledger that enables the storing and sharing of data without the risk of anything being tampered with, and is the technology behind the popular cryptocurrency Bitcoin and smart-contract platform Ethereum.
The latter automatically executes a contract when specific conditions are met, which is perfect for micropayments. Both can handle payments quickly and, crucially, of any denomination for a tiny reconciliation cost.
The blockchain could also help create universally readable digital online identities, another critical ingredient for setting up the prepaid e-wallets that enable micropayments on all kinds of devices, including wearables.
Bluetooth beacons everywhere could help micropayments
What will really bring micropayments to the forefront are the internet of things (IoT), and the proliferation of wearable devices.
Bluetooth beacons and sensors embedded in infrastructure, buildings and vehicles will be able to introduce unstructured data – such as weather – into the mix; the museum that charges you a small fee if you suddenly decide to come through its doors while it’s raining outside is a good example of how the IoT could supercharge a micropayments ecosystem.
Meanwhile, Bluetooth beacons and the physical web could monitor exactly how long you stay in, say, a coffee shop, a library or a karaoke booth – and you won’t even need to have your phone with you all the time.
We’ve already seen the first steps towards this, with our smartwatches allowing us to pay for things without having our phone present; the security technology is there.
However, being able to pay for a coffee by presenting your wrist is a long way from a gym charging you a fee based on how long you worked out for and how many machines you’ve used – each machine would need a sensor that read your wearable and required you to tap it on the way out, and that would require large investment and trust in a centralised system.
You’ve probably noticed one key thing missing throughout this piece: definitive examples of things changing massively for the average consumer.
We’re still donating what we want for museums, grabbing seats on trains where we can and using as much Wi-Fi as we’re allowed.
There are obvious issues to overcome, not least the sheer volume of sensors and connectivity needed to make wide-scale micropayments work.
That said, both the sensors and the connections are coming – the internet of things is a juggernaut that’s seemingly unstoppable, and 5G promises to make all those disparate devices instantly connected.
But there’s also the issue of making sure payments are simple, and more importantly, watertight financially.
Currently, payment datasets are not interoperable. Firewalls are everywhere. User profiles are myriad and separated, when what we really should have is one, centralised wallet that’s registered as safe for everyone, or at least systems capable of supporting different standards.
We need APIs, new algorithms and many autonomous software systems to make it all happen.
So for now, everything is disconnected; but with the gradual rise of cryptocurrencies, the popularity of e-wallets and the coming era of payments via messaging and social media apps, a major tech transformation is on the cards that could explode the very notion of fairness and value.