Digital Transactions Authoritative, insightful and timely information for payments professionals
Remember micropayments? Most payments providers gave up on this class of electronic payments several years ago when it became apparent that technology couldn’t crack the problem of high-cost transactions applied to very low-value goods. But now at least one player is attacking the market with cryptocurrency.
On Track Innovations Ltd., an Israel-based company known for processing vending payments via near-field communication links, said Monday it has introduced support for digital currency at vending machines that depends on quick-response (QR) codes.
The technology allows a consumer who has a digital cryptocurrency wallet on his phone to select a product, scan a QR code displayed on a screen on the vending machine, confirm the transaction within the wallet, and send the funds. The service supports Bitcoin, Bitcoin Cash, and Ripple, according to an OTI video.
OTI says that, as far as it can tell, its service is the only one of its kind now on the market aimed at vending and micropayments. The company, however, did not disclose how many machines have been enabled so far.
“Introducing the ability to pay with cryptocurrencies seemed like a natural fit for our products, while also providing our customers and consumers with even more payment options,” Shlomi Cohen, OTI’s chief executive said in a statement.
Traditionally, micropayments have been defined as transactions under $5. While companies like OTI and Malvern, Pa.-based USA Technologies Inc. have made steady businesses out of card-based vending payments, smaller transactions have remained elusive for processors because of interchange costs. One promising startup called Peppercoin Inc. made some progress a decade ago with an algorithm that bundled micropayments for processing, but the company was acquired and its technology ultimately fell into disuse.
OTI, however, embraces the market confident cryptocurrency can crack the micropayments nut. “We intimately understand the cryptocurrency market, as well as all players involved,” said Cohen. “After thorough evaluation and market research, we decided that OTI would invest some of our resources towards developing a solution to address this market.”
He does not labor under any notions, though, that the new service will catch fire soon. “Although this cryptocurrency solution may take time for customer adoption and generations of meaningful sales, we believe this new product offering will add great value for our shareholders, and contribute to OTI’s growth over the long-term,” he said.
Observers may wonder how Bitcoin, for example, could lend itself to micropayments, given what has been a wild ride in its transaction costs. But after peaking at a lofty $34 per transaction just before Christmas, Bitcoin’s median fee has slid to 17 cents, its lowest level since December 2016, according to Bitinfocharts.com. Bitcoin transaction fees are paid by users to incent miners, the parties that develop new Bitcoin, to process their payments.
