What is Micropayment

So, what is a micropayment? It is a non-cash transaction — using mobile phones or swipe cards — involving payment of less than Rs 250. The basic objective is to enable small purchases without using cash. For example, a villager buying soap worth Rs 20 should be able to pay for it from his mobile. Here is how: a user registers with a micropayment provider by sending an SMS. Post-registration, he recharges his micropayment account using a coupon. He can then go to any merchant registered with that provider, and make purchases by sending SMSes. In such transactions, the profit margin is very low, to the tune of 1.5-3 per cent, which is why companies need massive volumes to run their businesses profitably.

The article gives a good idea of what is micro-payment, and its current state in India. In case of India this seems to be a good idea, if people are educated about it and if the service is marketed well.

There is a huge % of population who do not hold a bank account and can be benefited by this, especially in rural India. To make micro-payment profitable, companies should partner with FMCG companies and concentrate on rural India more than urban India, I feel. FMCG companies have a great supply chain, they reach even the remotest corners on India. This penetration should be capitalized on along with the mobile companies.

Micro-payment becoming a threat to Credit cards, I don’t see it happening in near future. The awareness of micro-payment is very very low, in its current state people would go for credit cards, any day.

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