Retail CBDC could revolutionise digital subscriptions using micropayments?

There are many digital goods and services available on the internet: music, content streaming services, articles from various news media platforms, online games, online journals and various software tools that allow us to edit, share and proofread. These platforms usually require an annual or time-bound subscription that gives us full access to all the content and services. Spotify, for example, now offers a per-day subscription. However, these subscription periods are becoming shorter.

Some people don’t have the ability to subscribe to multiple platforms. Those who do find it difficult to manage multiple subscriptions and install so many apps on their devices often feel frustrated. Users are forced to choose among the many offerings on these platforms, which can lead to low conversion rates and limited subscribers. How many times have we tried to access news but were stopped by a paywall, making it difficult to find the content that interests us. We have ignored so many TV show recommendations because we don’t want to pay yet another year-long subscription.

Imagine being able pay for one song, one article, or an entire TV series, episode or season, all for a fraction of a sum. Micropayments are very low-value payments that can make this possible. Micropayments are a way to improve subscription models and increase conversion rates for platforms that have an all or nothing model. Micropayments can be a reliable and lucrative source of income for content creators and platforms that are hesitant about creating a subscription model out of fear of losing customers.

This model has been successful in India thanks to platforms such as Outlook magazine. In 2021, they introduced an article-wise micropayment system. It saw a conversion rate of up to 35%. Micropayments address other concerns regarding internet governance. These new revenue streams could help reduce the dependence on advertising revenues and the sale personal data. You can also make digital assets more accessible to a wider audience by making it available to them.

Hence, why don’t more platforms support this business model? Micropayments are not supported by existing payment systems, which is a common reason. Today, transactions involve a lot of intermediary involvement. Payments pass through many entities, including banks, card companies and payment processors, before they are settled. This makes it difficult to process large volumes of micropayments. Intermediaries charge fees for their services. These fees are usually borne by merchant platforms. Even though transaction fees are as low as 2%, most micropayments would have a fee that is higher than the actual payment value, rendering it financially insurmountable for most platforms.

These barriers could be overcome by a Central Bank digital currency (CBDC). All CBDC transactions are recorded directly and settled on the RBI’s central leadger. Direct settlement eliminates intermediaries, transaction costs, and makes it easier to process large volumes of retail payments. Although central banks do have the option to levy CBDC transaction charges, none of them has so far.

Smart contracts are able to program a CBDC’s digital nature. A CBDC instrument can have logic or code written to it, allowing payments automatically to settle at a predetermined date or when they are triggered by a particular event. CBDC offers a significant advantage over other payment methods. With no human intervention, a CBDC can be programmed so that it is transferred to a content platform simultaneously. This feature allows for high volumes of CBDC micropayments that can be processed immediately and securely.

The requirement to create an account and provide detailed payment details for online purchases via debit or credit card, as well as other payment methods, is a potential source of friction in the current payment process. These details must be verified by each entity as payments are processed independently. Micropayments are a great way to discourage purchases, especially if a user only buys one item or one song. The CBDC infrastructure could be made to allow micropayments to be as simple as cash at a kirana shop. The RBI proposes a model in which users can store their CBDC tokens digitally and make transactions. All CBDC tokens issued and processed through one entity, the RBI, seamless transactions may be possible between users’ CBDC wallets and the platform without the user needing to provide additional information.

A CBDC’s unique characteristics can be used to support micropayments models and drive a paradigm shift in the way we consume online content. The RBI is currently running a pilot to accept retail payments via CBDC. Future stages will build on these initiatives to determine the viability and viability of CBDCs for micropayments.


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