Cred and the art of micropayments

The topic of micropayments has struck a heated note amongst online paywall experts and content providers. There are many who denounce the system, marking it as a tried-and-failed experiment, while others proclaim it as the future of online transactions.

A micropayment can be defined as a financial transaction of a small sum of money, usually in an online context. PayPal defines this sum at US$12.00 or less, in terms of its own micropayment system. For the average end-user, micropayments are extremely useful.

For a minor fee, the user can gain access to their desired content, albeit only in bite-sized portions. Due to the size of the transaction, this content is usually rather limited and, thus, can be refined down to the user’s exact and immediate needs (for example, a specific online tutorial or a single song from their favourite artist’s latest album).

For businesses and online content providers, however, the micropayment system is a risky business. Due to the size of the transactions, profitability and sustainability require a good balancing act. Carefully researched pricing structures, as well as a functioning supply and demand curve, must be used to determine the correct pricing of the content available.

A primary example of micropayments being put to successful use is the Apple iPhone or iPod Touch app store. Not only can users purchase applications at rock bottom prices (lowest being US$0.99) but the applications that cost a bit more are still relatively inexpensive. The “in-app” purchase feature is another sterling feature from Apple, where content is offered for purchases (with the user’s iTunes account) from within an application. Not only does this enhance the user experience, it is so simple to do that users will be more likely to make further “in-app” purchases.

What’s next for the micropayment model? Enter Cred, a Johannesburg-based startup that launched its beta version in June. With Cred, any online content provider, from a premiere graphic design tutorials blog to a local garage band, can monetise selected content on their website with ease.

In their own words, “Cred is a set of API’s that connect into any generic content management system to create a paywall for that CMS. The content provider can then choose which content to charge for in order to better monetise their website either through individual payments or subscriptions.”

Started and bootstrapped by its three founders, Jason Kramer, Saul Kropman and Toby Kurien, Cred uses the micropayment model to make content affordable to the user and in volume, incredibly appealing for the content provider. Cred sees the business of paywalling a site through the eyes of the “Freemium model”, simply put give something away for free and charge for the rest. News, for example, is not a chargeable item but analysis, opinion and multimedia most certainly are.

Cred believes it’s doing what no other paywall developer has done in chasing after content creators of every different shape and size. Cred has a plugin for WordPress, which allows for anyone to use the CMS to create a paywalled site or piece of content.

It also gives people a single login to multiple sites, making the barrier to entry much lower than if you had to sign up to and pay for a single site each time. From the end-user perspective, Cred is extremely simple and user-friendly. Users can access only the content they desire, with full control over their credits and spending, and they can relax, knowing that their credits are being managed from a central control panel.

The micropayment system is not always a straight forward for online content providers and merchants to maintain, if they are not as big and dominant in their niche as a company like Apple. The aim of Cred is not to lock down sites so that publishers and media owners can make enough money to stem the losses of their traditional media empires but rather to offer a system that protects quality content.