Saturday
18
Jun 2005

Online payment service

(1:42 pm) Tags: [Business Ideas]

WIth all the rumors about Google starting an online payment service, I wanted to share my simple idea of a payment service that would become ubiquitous on the web. While I fully expect something from Google to be simpler to use than Paypal, and scale much larger, I would love to see Google take on micropayments.

The basic idea is to support micropayments between millions/billions of buyers and sellers. To acheive this, payment processing would need to be revolutionized:

Simple identity

Using something simple like sxip or similar, so that login and other high costs parts of the transaction go away from a user interaction perspective.

Front $1 to every user of the system

Or, alternately, have the user put the money into their accounts in larger chunks ($10-$20 or more). This will be the first key to a massive micropayment system, acting as a clearinghouse until the bill amount reaches an amount that the transaction can be passed to normal payment processors (PayPal, Visa, banks, etc). If a company like Google fronted $1 to each user of the system, that amounts to a maximum of $6 billion global maximum, they should be able to cover that.

Reduce the cost of a transaction

Confirm and process the requests in realtime, with no transaction log. A transaction log of billions per day would be a cost to great to bear for the system to work. Figure out what the system cost of one transaction (debit to one user, credit to another) is, set some cost per transaction, and let the system run. Invidiual vendors would be able to charge whatever they wanted, and could batch up transactions until they meet some minimum that represents profit to them.

Fraud prevention

Since you are not logging transactions, some sort of fraud tracking/prevention program will have to come into place. Google could use their IP in ‘click fraud’ here as well, or you could push some of the liability to the vendor of the transaction, and allow them to choose to log the transaction or merely refund any fraud requests.

If Google actually does something like this, I believe it will be the biggest impact to the current web that they have acheived to date.

Update: Charlene has some comments in the same vein, as well as David.

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2 Responses to “Online payment service”

  1. Kevin Dangoor Says:

    That’s interesting. I very nearly wrote on my blog that Google could implement a functional micropayments system.

    I’m just not sure that that’s what they’ll go after though. I was reminded of Clay Shirky’s article (that actually goes all the way back to 2000!) arguing that micropayments are bad, because people will need to make a thousand little purchase decisions every day. Imagine if your typical blog was 1 cent per page viewed. 1 cent is nothing and seems easy to throw away… but if every blog you viewed did that, you probably would view a whole lot less and think about what you subscribe to more. Here’s Shirky’s article:

    http://www.openp2p.com/pub/a/p2p/2000/12/19/micropayments.html

    That said, I do think you’re right that if Google pushed some kind of identity system and reduced the general friction in payments somewhat, they could produce a lower-cost (to buyers and sellers) system. This may have the sideeffect of enabling micropayments, but I doubt that their pitch is going to be about micropayments.

    I’m certain that they’ll keep a transaction log and that it’ll be no big deal for them. (I betcha they have an absolutely enormous amount of data being logged as it is.)

    One other thing to note that I didn’t see in the article that I had linked to or here: this story apparently was in the Wall Street Journal, which gives it a modicum of credibility.

    http://online.wsj.com/article_email/0,,SB111905141149263168-IdjgINhlaN4oJyobIKHbK2Bm4,00.html

    (I got that link from /.)

  2. Scott Sanders Says:

    I think the trick with the whole penny to view my blog thing is that users won’t do it. Since content is percieved to be free today, it is hard to make it not free. I think the natural places for things like this would be web servicey type things (1000 search queries for a penny, etc). Good thoughts Kevin, thanks!