Understanding Digital Currency…

…And emerging ways to pay online and on mobile

Using the internet to sell products and services is the ultimate goal of many websites we come across each day.  Yet, as an increasing number of businesses and companies move online, emerging technologies are also bringing fresh ways to pay and receive money as well as completely new ways to monetise mobile and web-based content.  While 2010 was dominated by trends such as freemium as used by services like Spotify and Evernote, as we move into 2011 new types of digital currency and payment technologies are appearing and diversifying.  This post aims to define some oft-used but sometimes confusing terms in the new world of money online.

Facebook Credits

At the end of January, social networking supergiant Facebook announced that they will be requiring all social game developers to process payments via their own in-site payment system: Facebook Credits.  The virtual currency, which has been in the works since 2009, allows users to purchase credits (currently costing $1 for 10) which can then be spent on items in Facebook games and other apps.  Advertised as being a safer and easier method of payment, it’s hard to see how the idea won’t increasingly appeal to users – and in order to get developers on board, Facebook are offering a host of cool incentives for app makers.

In-game purchases

Monetising mobile apps is often a matter of tough choices as to whether you offer free versions and advanced (often ad-free) versions, or simply charge for one version from the outset.  For mobile games, in-game purchases are increasing in popularity because they offer a portion of what is paid for, i.e. the first few levels of a game, and give users the opportunity to pay for later levels or other unlockable content.  This also ensures that such games have more chance of being discovered by potential gamers – an important factor for developers as the market becomes increasingly crowded.

Mobile payments, e-wallets and Square

Mobile payments are likely to be a big deal in 2011.  The idea is quite simple, why not leave our credit cards at home and use our 3G enabled smartphones to transfer payments for us?  After all, we all have online bank accounts?  Now, a number of companies are planning on making our wallets redundant.  For paying for items, Visa have announced that they will be rolling out their PayWave system by the end of the year.  On the flipside, Square (part founded by Twitter’s Jack Dorsey) is a smartphone service which allows others to pay you via your mobile.  Less than 18 months after launch, Square are already processing $1m payments a day.  They have also recently made the potentially groundbreaking move to stop charging $0.15 per transaction for merchants, making the new technology (a simple dongle and downloadable app) even more appealing to small businesses, freelancers and workers on the go.

Micro-donations

Micropayments has been a popular term online in reference to simple small payment transactions for a few years now.  Today, however, micro-donations are offering a new way for bloggers and start-ups to monetise content without requesting an outright payment or subscription fee, and by avoiding the sometimes off-putting ‘donate’ method.  New service, Flattr, is a good example which gives web-content providers (i.e. bloggers, journalists, developers) a button for the posts they create (similar to Facebook ‘Like’ buttons), Flattr users who view the site decide how much money to put into their account monthly – and this amount is then shared between the sites that have been ‘liked’ or ‘flattr’d’ at the end of each month.

It is certainly an exciting time for developers to approach charging for web and mobile content, and we are sure to see some intriguing changes over the coming year.  Social media is certainly having a big effect, as well as emerging mobile technologies.  We, here at GoTripod, are curious to see what takes off.