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January 28, 2007

Bill Gates: Microsoft Is Going into Online Payment and Credit Card Business

posted by MR WAVETHEORY at 1/28/2007 10:35:00 PM
Bill Gates talked about how Microsoft is exploring various ways to enter the online payment business. Bill said there are various ways Microsoft has explored to undercut credit card companies which currently charge 2.75% + .35 cents per transaction to online merchants. These charges basically make small transactions under a dollar impossible online. Imagine paying $1 for a product online and paying $.35 to the credit card company! Did anyone say ripoff?

Speaking at the World Economic Forum in Davos, Switzerland, Bill Gates indicated that Microsoft was looking into finding a way to make so-called micropayments a reality online. And to make it a reality, Gates noted that traditional credit card fees would need to be undercut, and severely. See, the credit industry makes money not only off interest, but they also scoop up 2.75% + $0.35 in fees for most transactions (on average). As you can see, this makes charging for inexpensive items quite unattractive; a $0.25 charge would be instantly doubled on account of fees. For people who have fantasies of selling web content by the page, this is unworkable.
Microsoft might come up with a flat fee payment solution.

The question is, how can Microsoft pull this off? The DOW Jones newswire quotes Gates as saying, "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."

It sounds like a brilliant solution.

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