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Comment by bhauer | Hacker News Reader

I am still waiting for a good micropayments platform to allow me to support arbitrary web sites with relatively low-friction (and high-privacy) small payments to consume their content. I would happily pay $0.25 or thereabouts to read articles on some of the sites I consider to be good content creators.

That said, I have somewhat high expectations. E.g., I would hope that such a platform doesn't take too large a cut (e.g., Apple app-store sized cut) because that's offensive to both readers and creators.

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I'm not optimistic that this platform will ever exist in the West. Micropayments is effectively blocked by the credit card industry with their high fees and a widely used micropayments platform would essentially disrupt the credit card industry - why would anyone pay Visa 1.9% if the new platform was sending payments for a fraction of a cent? And any player large enough (e.g. Apple) to deploy such a platform would rather not piss off Visa.

In China, where credit cards never existed, they already have a micropayments infrastructure. Sending payments is massively cheaper there and some businesses there, such as Podcasts are way more successful due to this model. Some podcasting subscriptions are sold for 1 yuan (15 cents)[1].

As long as Visa/Mastercard exists, I don't think we will see this come to the US. I wouldn't hold out for crypto either - it's not a technical problem. The technology has existed to make this reality for years.

[1] https://www.wsj.com/articles/chinese-show-willingness-to-pay...

This is certainly a problem, but I think examples like video game microtransactions and HQ Trivia payouts prove it's not unsolvable. $1 transactions at a 30% cut sound harsh, but are clearly capable of supporting companies. Or, if a trusted intermediary is available, micropayments can be batched into a few larger charges. This is definitely harder if you're going to leave money with consumers, who can cancel before a batched payment with little downside. But it could probably be managed, or people could be persuaded to pay a larger sum into a clearinghouse in advance.

The easiest approach might be to partner such a service with an existing alternate payment processor. Lots of people are already content to leave a few lunches worth of money in Venmo, which would both reduce payment fees and streamline the mental effort of buying articles. And cynically, an auto-refill setup would also reduce people's awareness of how much they were paying.

There are still major hurdles for this model - do you serve content and then hope you get paid? Do you offer refunds on articles people dislike? But I think the actual transactions can be managed, and I think the clearinghouse model could potentially resolve a lot of the other issues besides. As a quick example: 'refunds' for bad articles become vastly easier when haven't paid a transaction fee and can blacklist people who abuse the mechanic.

I never understood credit card fees interaction with small transactions (eg shops with $10 min); if its a perfentage fee, what does it matter how small the individual transaction is? Total revenue is hit by it all the same

A billion from micropayments and a billion from one payment should be equivalent..?

You're right about the general case; a restaurant running two $50 payments or one $100 payment usually won't see any difference. But a thousand $1 micropayments produce more overhead (and more risk) than one $1000 payment, so below some threshold it's not worth handling them. As a result, most card processors have rules to either block that payment pattern or raise costs on it.

Common approaches include:

- Caps on monthly transaction counts

- Caps on monthly payment amounts, with usage monthly fees

- Flat costs added to percentage fees

- Percentage fees with a minimum charge

Similarly businesses which know they'll see numerous small payments mostly just charge enormously high fees. The Apple Store and Google Play both take 30% transaction costs, and I suspect they pay their processors noticeably more than the common ~%2 rate despite their size.

Credit card transactions typically have a percentage component and a fixed-fee "swipe" component. So on a $10 charge, the vendor might pay 2.9% ($0.29) plus a $0.30 swipe fee.

Crucially, the swipe fee is the same if the transaction is $10, $1,000, or $1. Micropayments are hard to make work on top of this infrastructure because the payment network eats up 60% of a $1 transaction and nearly all of a $.50 transaction.

What's stopping an online bank from setting up their own system?

Comparative advantage. The amount banks could earn on their traditional products and services dwarfs whatever pennies they'd scrounge up by creating a B2C Patreon replacement.

Completely disagree. Having to make a purchase decision is stressful and a cognitive nuisance. I'd much rather pay $10 a month for Netflix and not think about it, than $.20 to watch an episode.

I fret much more over subscription purchases than one time purchases. They can be annoying to cancel, they can be forgotten, and they can be heavily underutilized. In fact I think these attributes are a cornerstone of the business plan.

I'd love to know what the demographics of this split are. I feel precisely the same way, but the success of e.g. microtransaction games suggests that it's not a universal view. Whereas for me, microtransaction games are worth either 0 or 1 transaction and then I never even contemplate further payments.

(Hating small purchase decisions might be a common view, since microtransactions are all about long-tail profit exceeding a normal purchase price. But I'm still curious what the demography looks like.)

Netflix would prefer you do this, too. In subscription models, you are almost guaranteed to be paying more than you're using. Only when a service is first starting and trying to attract subscribers is it likely you are paying less than you use.

How do you measure the value or cost of how much someone uses for s product like Netflix? Compared to equivalent iTunes purchases, a Netflix subscription is inexpensive. If you are referring to the bandwidth, the cost is close to zero anywhere.

No, I'm not talking about bandwidth. iTunes isn't generally selling one-time access, but perpetual ownership (kinda) of a single episode. This accounts for the outlandish $2 per episode sort of thing.

A non-subscription model for a Netflix service would be closer to fractions of a penny per view.

Fractions of a penny per viewing can only refer to bandwidth costs; it's 1-2 orders of magnitude too small to cover the costs of producing or licensing a show, let alone Netflix' other fixed operating costs.

Everything Netflix talks about is getting users to spend more time watching shows, not less. They certainly want subscriptions because they make more money, but they do it by aggregating a ton of content into one subscription and providing it at effectively no variable delivery cost. The result is that users pay less per hour watched than can be provided by anyone a la carte.

I don't follow your reasoning. Whatever the delivery costs may be, they don't determine the service cost. That's determined by value to the customer (though delivery costs sets the minimal viable service cost).

Their adherence to a subscription modivates the view of getting users on the platform for as long as possible, regardless of what they're watching. A pay per view model would twist motivations another way.

Yes, that is my original point I wanted to make in disagreement with you. Netflix does not make more money off a subscription because of underuse, they make money because of, if anything, overuse which is possible because the value to the watcher (some number below the a la carte rental price of $2-5 set by competitors) greatly exceeds the variable cost of providing the view of the show (nearly $0.)

Netflix mainly has fixed costs from licenses. The marginal cost of delivering another video to a subscriber is negligible. They want you to keep watching and stay engaged.

What happens when Netflix no longer carries your favourite show, and now you're paying $X for a service you use less and less?

You eventually quit. That's only one purchase decision compared to many. Even if you evaluate the decision every time a show you like gets pulled, that's still less financial decision making than paying per piece of content.

It's a great use-case for Cryptocurrencies: low transaction fees to send micro-amounts of goods across the network.

That seems like part of what Brave is trying to do with the BAT: Use BAT split among websites based on the amount of time you spend on each site.

I'd rather see a self contained library that allows websites to easily insert a button which lets you tip 0.02c or whatever to them with a single click. No idea what you'd need to do to create something like that, but it seems like a really compelling way to get people to spend on sites they like. A tiny amount of pennies sent via crypto with the press of a single button could be a sizable stream when you've got scale to it.

In fact it's not a good use-case for Cryptocurrencies because as it stands today, it takes approximately 10 minutes to resolve a transaction in Bitcoin.

You can explain this problem away with appeals to floating networks that ride on top of bitcoin, eth, like lightning etc...however it's unclear why those would be any better than a lower cost ACH or other debit processing system.

I tire of saying this in response to people who believe that credit and debit cards are "instant" but they're not. They take up to a day or two to process and clear and for money to actually change hands. The only thing that's instant is the check to see if you have the funds to cover the transaction. In this case even BTC's on-chain processing of 10 minutes is pretty darn fast.

As you said, other crypto solutions including Lightning Network, ETH, etc are faster and will be able to scale to orders of magnitude more transactions in the near future.

It's not a transaction though, it's a donation. Time to resolve is nothing here, it's fire and forget.

On top of that ACH or other systems require you to put in real banking information rather than having it be a separate wallet you use to pay.

It allows a more complete separation from payment processors.

Check out IOTA. In theory (and so far in practice) it solves the problems you describe. It does not yet have as solid a theoretical foundation as blockchain currencies, though, so there's higher risk that it turns out to have some flaw that nobody's seen yet.

Or just work out some hack around the existing transaction fee systems.

Nano is perfect for this type of transaction. Quick and free.

Wouldn't the volatility of cryptocurrency be a reason that companies wouldn't want this as a primary method?

Don't get me wrong, the value of USD, GBP, or YEN can rise and fall relatively quickly. The conversion rate of GBP to USD dropped from about 1.40 GBP/USD to 1.20 GBP/USD in the span of a year. But cryptocurrencies can cause devastating losses. BTC dropped nearly 30% from Dec 2017 to late Jan 2018, and it has been on the decline ever since. It seems that the only way for a business to confidently convert BTC into the 0.25 USD would be to do nightly-ish transactions.

I'm familiar but not well versed in BTC operations. I don't know how much overhead (fees) would go into nightly transactions, and how much the fees would rise with the volume of each transaction.

>Wouldn't the volatility of cryptocurrency be a reason that companies wouldn't want this as a primary method?

Correct. There are so many cryptocurrencies out there, and scams are so widely perpetrated that it's absolutely insane to keep any significant amount of money in it.

In the case of MTGOX it's like the world's largest bank just blinked out of existence. A company could be insolvent overnight. At least most major governments have incentive to keep their shit together for fear of a societal collapse.

Mt. Gox was a Magic: The Gathering trading platform that accidentally ended up being "the largest bank in crypto". So Mt. Gox shares more in common with early, early banks, of which many did fail.

At any rate, the current dominant examples like Coinbase do not seem to share the same problems as Mt. Gox and having watched a security presentation by one of their executives, I believe they have great practices to prevent hacks.

Sure, but are they backed by the FDIC or anything equivalent? (no) What happens if they are compromised? (your money is gone forever).

Actually yeah Coinbase is an FDIC insured bank. Any USD you have on there is insured.

Somehow Overstock.com has been accepting BTC as payment for several years and they've been more than enthusiastic about it.

https://help.overstock.com/help/s/article/Bitcoin https://www.overstock.com/blockchain

Not sure whether they are instantly selling the coin or keeping part of it or what. I suppose it would depend on a company's risk tolerance. In the case of digital content, I might be willing to accept the volatility risk in exchange for access to a relatively untapped market and supporting a censorship-resistant monetization platform.

Stable coins, like DAI and USDC also offer many of the benefits of crypto ecosystem with nearly zero volatility relative to the dollar.

I read it as news sites using cryptocurrency as a primary method to avoid high transaction fees.

When it's a secondary method, it can be used as a way to invest in a growing market. You can potentially react to volatile changes in a currency if it's part of an investing strategy without worrying if your company will fold overnight. If it's your primary means of accepting payment, then your income is essentially tied to the volatility unless you cash out immediately.

Stable coins would be the obvious solution, but then I wonder what's the drop rate of someone who is only familiar with BTC and not other coins?

Part of why the overhead doesn't matter here is because bitcoin wouldn't be used: It'd be some other crypto, like BAT (which is what Brave uses).

The goal would be to make this a ubiquitous system (which is what Brave is trying) where users would have a wallet of BAT where each "coin" represents a small easy to exchange tip.

Users can buy BAT wherever, recharge their wallet and tip micro amounts to websites.

Brave currently just has a BAT wallet with recharging that doles out a percentage of each token to whatever websites you visited based on amount of time spent there.

If the system is ubiquitous enough, the volatility will go down as more people are seeking to purchase the coins.

The coins will have a limited supply which is subject to a minimal amount of inflation as defined by the group which works on it.

In this case, would the only use of BAT (or something similar) be avoiding transaction fees as a high percentage of small transctions? For example, Visa charges 1.5% of the transaction + $0.10. The transaction fee on a $0.25 micropayment would be $0.10375 - a hair above 40% of the transaction. Otherwise, what is the value add of BAT compared to storing payment information with a vendor or someone like Stripe?

The best form of payments ever to support journalism was classified ads. They brought in tons of cash and they were shunted to their own section of the publication so they were not obtrusive.

Also, and this cannot be overstated, they were often fun.

Sometimes brute force is what's required to get people to cough up their payment details. iTunes had people paying $1 to buy individual, DRM-ridden (since removed) tracks at a time when Limewire and BitTorrent were popular.

I believe it was partially the UX that got people spending. For example, ITunes won't grab album art for the tracks in your library by default. You'll have to have an iTunes account with a registered CC number. Retrieving the art is free, but it can't happen without those payment details. I dislike looking at collections that don't have the art displayed, so I put in my CC.

So now, when you're exploring the interface and come across some new music/movies you're interested in, the friction involved in purchasing is near-zero; point, click, confirm the purchase and it's yours.

At some point, someone will create a CMS plugin of some kind that adds a "purchase this article for $0.50" banner and handles the payment processing and fees. The challenge will be to incentivize users to put their details in.

Then you might be interested in Brave (brave.com). Their cut is 5%.

I really like the concept but I don't use it because it doesn't support the mac KeyChain.

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