PayPal Plans an Enhanced Micropayment Offering by Year's End

PayPal wants its merchants to have an easier time nickel-and-diming consumers, literally.

The online payment system giant is planning to debut an improved micropayment service by year's end. The move would allow consumers to make tiny purchases as they go along, rather than a larger upfront payment that can be debited down in bite-size bits, according to an Associated Press report.

Currently, PayPal's micropayment option calls for merchants to fork over 5% for each transaction and an additional five cents. PayPal generally views micropayments as anything purchased for $10 or less. But the company is considering an online micropayment program that would allow consumer purchases to be combined before they're billed by PayPal. The savings would largely come from avoiding multiple five-cent transaction charges.

PayPal is also considering retooling the timing of when payments are requested. For example, rather than being interrupted midway through an online game, the payment request may come at the beginning or end of a game.

Previous Efforts Have Failed

The changes are built around the assumption that consumers want to pay for items as they go along, rather than dole out an upfront chunk to be debited down. But earlier efforts built around such a notion have failed to take off over the past 15 years.

In large part, that type of micropayment system failed because transaction costs outstripped the actual value of the item purchased -- a point particularly driven home when volume sales didn't materialize, according to E-Commerce Times. PayPal, however, is apparently banking on the notion that by making its micropayment system easier and cheaper, more folks will use the system, allowing PayPal to cover the costs through volume.

If that bears out, PayPal parent eBay (EBAY) stands to benefit, a nickel and a dime at a time. Ka-ching!