How Micropayments Can Drive the future of the Nigerian Economy

One important factor of micropayments is the fact that its definition varies from one individual to another. Generally, micropayments are regarded as financial transactions involving microscopic amounts of money. Globally, micropayments refer 소액결제 현금화 to transactions of less than 12 USD. According to techtarget. com, a micropayment is an e-commerce transaction involving a very small n amount of money in exchange for something made available online, such as a software download, a site or Web-based content.

Micropayments are too small to be feasible for processing through the traditional credit card/debit card system. Amir Herzberg of IBM recounts “Micropayments are for anything that is too inexpensive to pay by credit card”.

The major challenge facing the feasible application of micropayments is the need to keep costs for processing individual transactions low which is unrealistic when transacting microscopic amounts of money typical of the nature of the micropayment system. Several attempts have been intended to make such systems financially feasible to the providers such as the bill to phone model that companies like Zong and Boku have employed. The bill to phone ensures that consumers are able to charge low value transactions to their mobile phone and are sent a transaction code by TXT to complete the transaction. However, the sharing formula that exists between the providers of the micropayment platform and the Mobile Network Operators (MNOs) is basically not in favour of the providers, it’s been the primary reason for the slow adopting globally.

Largely, micropayments have been used for online transactions in the social community space on websites online like Facebook where users should buy virtual items in games like mobwars, premier football and This popular game to mention a few. It’s foray into the print media for pay per view content has been very frustrating as users would simply navigate to another website where they can get the content for free.

Micropayments has had its share of attempts at standardization notable among these attempts is the micropayments per fee specification of the W3C (World Wide Web Consortium) which includes a Common Markup for Micropayment Pay-Per-Fee Links and a description of a wallet handler that serves all requests for the per-fee service. However since vendors implement disparate exclusive micropayment structure it’s avoidable the adopting of W3C’s specification.

As an emerging area, it has underwent some metamorphosis which was clearly described by Robert Parhonyi of the University of Twente in the Netherlands in his paper “Second Generation micropayment systems: Lessons Learned”. He believed that the market for low value products such as online music and videos and the role of micropayment systems for selling such products are expected to grow appreciably. He classified micropayments into 2 generations in which the first generation appeared around 1994, with systems like Millicent, eCash and cybercoin which were unable to gain market share and evaporated slowly in the late 1990s. Your second generation appeared around 1999-2000 and are still in business.

He believes most of the failure causes have been accounted for in the second generation and have a much better chance to fulfill its purpose largely because of the way the Micropayment System Operators (MPSO’s) have implemented the technical and non-technical characteristics of micropayment systems such as the use of expression or account based platforms as the medium of value exchange, User friendly, Anonymity, scalability, Agreement, security, interoperability, trust, coverage, privacy, pre-paid or post-paid and the choice of multicurrency support. Some of the 2nd generation micropayment systems include minitix, Bitpass, Wallie, PaySafe Card, WebCent, MicroMoney and SoftPay.

In Nigeria, online payment has been wrought with several cases of fraud especially with the use of debit cards. Individuals are no longer comfortable with such medium of payment and often ask themselves if it is worth it to expose information to consummate transaction on the web for low value transactions. Some people assert that billing for small portions of a service reduces your requirement for security. In this context, security is defined here to be the relation of security cost to protected value of the transaction. The security challenges above plead with for a new direct to consummate low value transactions that is sweeping and innovative enough to provide musicians a platform to sell their music, software developers their small applications, wedding photographers their pictures and all the other content providers a medium that is fast, convenient and easy to use without the polices of the traditional payment systems.

The revenue potential is huge as it covers the banked and the unbanked people. The majority of the revenue is expected to are derived from the unbanked according to EFINA there are over sixty four million Nigerian adults who have never been banked, and the private sector understands that the Nigerian microfinance industry estimated at NGN 900 million is profitable. The unbanked money in circulation is estimated to be NGN 1. 2 Trillion as at May 2009, this figure is growing and would serve to strengthen the financial system if platforms such as micropayments are used as a tool to direct such money into the mainstream economy.

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