News.com writes that digital content is sparking growth in the use of micropayments:

Micropayments are typified by the 99 cents that iTunes charges to download a song or the $2.99 users might see on their Cingular Wireless phone bills after buying a custom ring tone.

According to recent research published by TowerGroup, the total market for Internet and wireless micropayments, led by demand for digital content, will increase by 23 percent annually over the next five years to reach $11.5 billion by 2009. TowerGroup, based in Needham, Mass., charted the micropayments market at just over $2 billion in 2003.

Bruce Cundiff, an analyst with Jupiter Research, thinks the e-commerce market is in its third or fourth wave of development of micropayment technologies. The success of iTunes, coupled with continued growth of broadband, will make digital content the catalyst that pushes the sector forward rapidly, Cundiff said.

“What it comes down to is that there simply must be a viable transaction model for smaller-cost products to make a dollar off e-commerce sales, but I think with what we’ve seen already in digital media, it’s clear that people are figuring out how to make it work,” Cundiff said.

Among the vendors vying for a place on the micropayments landscape with alternative payment technologies are firms including BitPass and Peppercoin, which are taking markedly different approaches to the sector. Peppercoin serves as a micropayment transaction aggregator that helps vendors save money on credit card charges, while BitPass markets stored-credit accounts and transaction processing to help facilitate both buyers and sellers.

BitPass’ system works much like the prepaid calling cards you can buy at many convenience stores. Customers put money into debit accounts and can use the funds at any site affiliated with the company. Vendors can begin accepting the BitPass cards simply by downloading a free software client provided by the company.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.