Micropayments via Credit Cards

WSJ writes:

A decade after they began encouraging spenders to put everyday purchases on plastic, financial institutions now want people to use them for even smaller transactions. Known as “micropayments,” these transactions typically are less than $2 and can ring up sizable industry profits even when they are less than a dollar.

After making a big appearance in online transactions a few years ago with the ability to charge a 99-cent song downloaded from Apple Computer Inc.’s iTunes, tiny payments now are showing up more often in the physical world.

The push toward smaller transactions is part of the credit-card industry’s continuing strategy of getting consumers to use plastic instead of more traditional forms of payment. Consumers already are moving in that direction: The number of U.S. electronic payments topped the number of cash and check payments in 2003 for the first time, according to a study conducted by the American Bankers Association and Dove Consulting, a Boston consulting firm. Cash and checks now account for 45% of consumers’ monthly payments, down from 57% in 2001 and 49% in 2003, according to the latest version of the study, issued last week.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.