What is Micropayment?
Micropayment refers to very small payments that are made by a consumer and processed by a merchant, usually through an online transaction – such as making a single wager through an online casino. Instead of paying processing fees on every small transaction made through a large business, that business may opt to use a third party to manage these micropayments and handle many small amounts as one bulk price.
Micropayment systems have emerged to handle the millions of small online transactions that take place every day. A micropayment is any small amount in a single transaction – often defined as a payment under $10 or $5. Some companies may class micropayments as payments of less than $1 – but managing such small payments has challenges for a retailer, even under a micropayment system.
Most transactions that occur online involve fees for the purchaser and for the merchant, and when many small transactions are made those fees can soon add up. Micropayment platforms are third parties who store payments and distribute them as larger payments with less handling fees – and some retailers and services use their own internal micropayment platform.
Online casino sites deal in micropayments, with small wagers being made often by players. They reduce fees for themselves and the players by setting deposit and withdrawal minimums, reducing the number of small payments passing between the two parties, and will often store small bets on a third party server before processing their win take as a bulk sum. Most casino sites partner with a micropayment provider for this reason, or choose a payment merchant who deals in bulk micropayment management.
Any party establishing their own micropayment platform must be fully licensed to do so, and needs to comply with regulation in the home nation of the company and the player. When outsourcing micropayment management, consistency for the customer and a safe, smooth transaction process are vital.