December 14, 2005

Internet marketing research firm Ipsos-Insight just published a new report that reveals Internet users are more likely to make micropayments (payments of less than $2 or $3) with their credit card.

In fact, based on a survey of a random sample of 1,115 American consumers aged 12 and over by phone, Ipsos and Peppercoin (a payments technology company) found that about 45 million US residents were happy to make Internet purchases of $5 or less with their credit or debit card.

This represents an increase of 23 percent since September of last year. Even purchases as low as $2 or less have become more popular. By fall 2005, 20 million US Internet shoppers aged twelve and over had made such transactions, an actual increase of 29 percent from September 2004, and 305 percent since October 2003.

eMarketer estimates there are about 115 million online shoppers in the US.

Online micropayments have received a boost from the popularity of digital music services, which allow users to buy songs for $1 or $2.

But the use of micropayments on the Web has started to progress past digital music purchases, with 10% of those surveyed having spent $2 or less on an online purchase having done so from at least 6 Web sites.

Credit cards are already the dominant form of online payment.

According to a report by Forrester Research and Internet Retailer, almost 80% of online shoppers have used credit cards for purchases in North America as of Q1 2005, with Paypal and debit cards used by around 40% and other methods used around 10% or less.

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The trend towards making small payments with cards is not confined to the Internet. In some ways, it is a more important shift in the offline realm, where there is the option of using cash, unlike one the Web.

Credit card companies are hoping to encourage consumers to make more purchases on their cards, including small payments usually confined to currency.

To this end, many are making it easier for merchants to accept cards for small amounts and still turn a profit (until now, many retailers wouldn't accept cards for small payments since card companies' surcharges would make the purchase a loss).

Ipsos and Peppercoin found that consumers are open to paying for everyday items like coffee and beverages, parking meters, and vending machine or fast food. These are all among the most common cash purchases currently made by respondents.

Source: eMarketer