Understanding Microsoft’s New Online Payment System

From the World Economic Forum, Microsoft announced that they are now developing an online payment system. It is no surprise to see Microsoft getting into the digital money game, however, it is a big surprise to see they are setting the lofty goal of super low transaction fees.

Bill Gates has said, “If you want to charge somebody $0.10 or $1 a month, that will just be a click…you won’t have to manage some funny thing or pay some big credit charge, where half of it goes to the clearing.” Source: CNNMoney

Bravo, Mr. Gates, with this solution you will undercut online credit card transaction fees. Consumers have a huge appetite for a widely marketed, convenient, online payment product with this low cost feature and it should be very well accepted. A bit like e-gold I believe, but MUCH more mainstream. Yeah!!

The ability for anyone/anywhere to easily load their account is critical for success. In comparison, while transaction fees on e-gold are very small for most new users, loading their e-gold account still remains a mystery.

Will the new Microsoft payment system allow reversal of transactions…ie chargebacks like PayPal? Or will each transaction be final and NON refundable?

It seems from reading more about this new project, Microsoft is going to use their existing Microsoft Points Framework only expanding it for greater use. ‘Points’ are already being used in Xbox 360 plus the Zune Marketplace and can be accessed from a Windows Live ID account.

Critical for the success of this project is the option to load a ‘Points’ account using cash and it appears that Microsoft has already addressed that issue. Prepaid ‘Points’ cards can be purchased at participating stores using a charge card, cash or check etc.

You can buy Points online from the Marketplace itself by using your credit card, or you can pick up Microsoft Points cards at many participating retail locations and use those Points to purchase new music that you want.

Please note — you cannot buy a prepaid PayPal card and as credit cards are so widely used, there is no other digital money available in the US from prepaid cards. Webmoney offers prepaid cards. Also the software and network for a prepaid e-gold, Pecunix and 1MDC card is already operating through Au-gold.net (one of my creations). However, these card programs offer little or no US sales.

Because using a credit card is so well accepted online, the demand for prepaid ‘money’ cards is not there.

This also leads me to ask….with the recent closure of BitPass, also a micropayments company, the concept of charging a small fee for Web-based content and services (other than music) which are now offered across the web for free…. is going to be a difficult road ahead for any payments company.

A new online payment service must have: easy and quick to open accounts plus fast, convenient and easy (one click) ways to spend the money. If setting up, funding and spending that .75 cents for online content becomes too difficult, users will simply pass on the sale.

Of course if a perfect payment solution is possible on a global scale, Microsoft is just the company to deliver it.

My first impression of this new system? Success seems very possible using their existing Microsoft Points Framework and also including their prepaid cards.

Personally, I would love to see this type of new product available from the Microsoft company. I’m a big fan :-)