How Micropayments Can Power the Future of the Nigerian Economy
An important aspect of micropayments is the fact that their definition varies from person to person. Micropayments are generally considered financial transactions that involve very small amounts of money. Globally, micropayments refer to transactions of less than $ 12. According to techtarget.com, a micropayment is an e-commerce transaction that involves a very small sum of money in exchange for something available online, such as a download of a web-based application, service, or content.
Micropayments are too small to be processed through the traditional credit / debit card system. Amir Herzberg of IBM relates “Micropayments are for anything that is too cheap to pay with a credit card.”
The main challenge facing the viable application of micropayments is the need to keep individual transaction processing costs low, which is not practical when conducting transactions of very small amounts of money typical of the nature of the micropayment system. . Various attempts have been made to make such systems financially viable for providers, such as the phone billing model used by companies like Zong and Boku. Billing to the phone ensures that consumers can upload low-value transactions to their mobile phone and are sent a transaction code via SMS to complete the transaction. However, the trade-off formula that exists between micropayment platform providers and mobile network operators (MNOs) does not greatly favor providers, this has been the key reason for slow adoption globally.
In large part, micropayments have been used for online transactions in the social community space on websites like Facebook, where users can purchase virtual items in games like mobwars, world-class soccer, and Farmville, to name a few. Their foray into print media for pay-per-view content has been very daunting as users simply navigate to another website where they can get the content for free.
Micropayments have had their share of standardization attempts, most notably the W3C (World Wide Web Consortium) specification of micropayments by fee, which includes a common markup for micropayments pay-by-fee links, as well as a description of a wallet manager. that attends all requests for fee-based service. However, since vendors implement a disparate proprietary micro-payment infrastructure, this has prevented adoption of the W3C specification.
As an emerging area, it has undergone a metamorphosis that was clearly described by Robert Parhonyi of the University of Twente in the Netherlands in his article “Second generation micropayment systems: lessons learned”. He predicted that the market for low-value products, such as online music and videos, and the role of micro-payment systems in selling such products, is expected to grow substantially. He classified micropayments into 2 generations in which the first generation appeared around 1994, with systems like Millicent, eCash and cybercoin failing to gain market share and slowly disappeared in the late 1990s. The second generation appeared around 1999 -2000 and is still operational.
He believes that most causes of failure have been accounted for in the second generation and stand a much better chance of succeeding in large part due to the way micropayment system operators (MPSOs) have implemented technical features. and non-technical micropayment systems such as the use of platforms based on tokens or accounts as a means of exchange of value, ease of use, anonymity, scalability, validation, security, interoperability, trust, coverage, privacy, prepaid or postpaid and the multi-currency support range. Some of the second generation micropayment systems include minitix, Bitpass, Wallie, PaySafe Card, WebCent, MicroMoney, and SoftPay.
In Nigeria, online payment has occurred with several cases of fraud, especially with the use of debit cards. Consumers are no longer comfortable with this means of payment and often wonder if it is worth exposing private information to consummate transactions on the web for low value transactions. Some people argue that billing for small portions of a product or service reduces the need for security. In this context, security is defined here as the ratio of the cost of security to the protected value of the transaction. The above security challenges call for a new channel for consuming low-value transactions that is radical and innovative enough to provide musicians with a platform to sell their music, software developers their small applications, photographers their images, and more. all other content providers a medium that is fast. convenient and easy to use without the restrictions of traditional payment systems.
The earning potential is huge, covering both the banked and unbanked population. Most of the income is expected to come from the unbanked according to EFINA, there are more than 64 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. Unbanked money in circulation is estimated to be NGN 1.2 trillion. In 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 channel said money to the conventional economy.
