A service that has been in alpha test for the past three months to allow consumers to make micropayments for entertainment services is expected to be rolled out in the next month. Early participants in the service offered by Waltham, Mass.-based Peppercoin Inc. include Music Rebellion, an online service that allows consumers to purchase individual songs for between 12 cents and $1, and Celebrity Rants, a site that offers humorous animations that consumers can download for 50 cents apiece. While a number of micropayment options were offered in the mid to late 1990s, they failed because of the limited demand and high cost of offering the payment services. But Peppercoin executives say they can allow Web retailers to accept payments for less than $1 at an affordable cost. The way the service works is that consumers sign up for the service through a participating merchant site and guarantee all future payments with a credit card account. When customers purchase items by clicking on the Peppercoin option and entering a password, the cost of the purchase goes onto their account. Their credit card is then billed for the total of all purchases made in a monthly billing cycle. Meanwhile, retailers are paid in increments of $10 for multiple purchases, using a mathematical formal that relies on probability to aggregate the payments. Rob Carney, vice president of marketing, says Peppercoin charges retailers between 6% and 9% of the purchase value. On a 50-cent purchase, an 8% rate would cost the retailer 4 cents. Carney says in the past, many content sellers on the Internet either had to give the service away for free or charge prepaid or subscription amounts. A lot of consumers prefer a “pay as you go” system, Carney says. He explains that Music Rebellion had a prepaid service previously, but with the micropayment option, use of the firm's services in one month equaled the total of the prior two years. Carney says other micropayment services may have a better chance of success now that many Internet-based content merchants must rely more on selling their products and less on advertising revenue. “When the Internet advertising boom went bust, services had to find a way to charge for content,” he says. Peppercoin was founded by former Massachusetts Institute of Technology scientists with encryption backgrounds who were also involved in founding RSA and Verisign. While Peppercoin's initial plan is to get its own service up and running, the firm hopes longer term to sell its technology to financial institutions and others that can get their own services up and running.
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