Companies have struggled for years to find a simple way to get consumers to set up a payment account without derailing the checkout process. One company is taking a step back and asking: Why delay a sale by demanding money?
Munich, Germany-based LaterPay lets consumers acquire digital content by simply acknowledging they are willing to pay at a later date on a merchant site selling low-value digital content such as video, games, music, books or magazines.
That's a model that the company hopes will fly in the U.S., where it plans to launch its service in a few months. The company set up an office in New York City in preparation for that launch.
The concept is not entirely unique; it somewhat resembles that of carrier billing, wherein consumers without an account at a merchant simply postpones the payment until it appears on their next phone bill.
Carrier billing providers like Bango focus on digital content sold within apps. Boku, another carrier billing provider, has experimented with mobile ticketing and payments at parking garages. It has also eyed carrier billing for purchases of physical goods, providing the service at Japan's largest coffee shop chain, Ueshima Coffee Co.
Rather than in-app and mobile payments, LaterPay is focused on digital content purchased through a browser. Calling it an "iTunes for everything," Lexie Kier, managing director of USA for LaterPay, said the company powers "micropayments anywhere over one cent for content across all open systems across the Internet."
Of course, with iTunes, Apple stores bank cards or gift cards with a user's account to fund future purchases. A customer clicking on a merchant's pay button powered through LaterPay can instead obtain a certain number of items, or a certain dollar value set by the merchant, before being prompted to pay.
At that time, the user registers with LaterPay and those credentials are used for all future purchases. This reduces friction for the consumer but also reduces costs for the merchant by allowing LaterPay to aggregate those earlier sales into a single transaction that incurs a single transaction fee from Visa, MasterCard or PayPal.
That type of a payment acceptance engine is likely to resonate first and foremost with self-service content providers, particularly bloggers selling articles or publishers selling periodicals, Kier said.
"It is easy for content providers to implement LaterPay and customize the way they want to use it," Kier said. "It can be unit based on items sold, it can be time-based for deals only available for a period of time, or customers can pay to skip ads when visiting that site."
LaterPay supports payment acceptance for many journalism sites in Germany, Kier said. "Many are selling premium articles daily and we are seeing incredible numbers."
These consumers aren't limited to buying single articles; when a customer reaches a certain number of articles purchased, a message appears encouraging the user to subscribe to the site for full access.
When it comes to website content, many opportunities exist for digital payment services and features, said Richard Oglesby, president of AZ Payments Group and a senior analyst at Double Diamond Payments Research.
"It is a problem for a digital content provider to deal with all of these small payments, and it can get expensive if the customer is charging it to a phone bill," Oglesby said.
If looking at if from a "logic perspective," LaterPay's concept makes a lot of sense, Oglesby said. But its challenges will come in the form of consumer adoption and content providers converting users to more expensive sales.
"Publishing is a tough business right now, and people are used to subscriptions," Oglesby said. "They are not used to paying by the article, except maybe when doing medical or market research."
One of the reasons subscription rates are low in the digital world is many sites generally allow the free viewing of 10 articles per device, and consumers figure out a way to make the best use of that policy, Kier said.
"Our vision is to unbundle everything, make every single piece of content separate, or provide options for a one-week pass, or one hour a day, for someone doing research, like in the New England Journal of Medicine."
For the most part, LaterPay wants digital content providers and publishers to view it as a way to funnel a casual one-time purchaser into a more consistent customer, Kier said.
A subscription to a site delivering digital content is a commitment that is made easier for consumers if they are able to test drive that content through single article sales, she added.
"Many bloggers are excited about this because they are now able to make a living off of their content," Kier said. "We have this wrong notion that everyone is cheap and no one wants to pay for content, but the reality is that everyone we offer this to understands it is allowing creators of that content to create high-quality stuff."
If LaterPay is going after more consumer-centric publishing, it can help monetize that process, Oglesby said. It is a different model than most seen in the U.S., though it is one with a lot of potential, he added.