Opportunity Analysis for Developing a Micropayment System in Local Area Networks

Although transactions with small amounts of cash are simple and quick, they still present drawbacks. The main issue is to drastically reduce costs for very small electronic payments and solutions have already started to be identified. In this paper, the proposed solution implies aggregating payments into a privately owned local area network that operates at low costs and making only one transfer to the banking systems for each buyer. The equipment used has to be easy to operate and straightforward, security procedures have to be simple and based on the rapport between the cost of fraud and the expected value obtained through fraud and rapports with the bank have to be kept within profitability margins. 1. Introduction Many electronic based activities have imperceptibly become common practice due to their simplicity, low costs or simply due to being fashionable. Such examples are GPS navigation, mobile phones or iPods. We are no longer disturbed by the fact that certain areas are under video surveillance for our safety or that we need to register in order to access specific services provided by a website or to follow certain banking procedures for operations exceeding a preset limit. Referring to the financial sector, we can see how the system protected itself against malicious implications through a simple system that is still rather difficult to implement: traceability. In the case of transactions involving large amounts of cash, there are legal banking regulations that deal with the maximum amount to be withdrawn, notification periods for transactions, justifying the costs and monitoring transactions that surpass certain values. These norms have as aim limiting the use of this type of transactions in major illegal activities with identifiable and immediate effects such as drug or weapons traffic or terrorist acts. Transactions with small amounts have the advantage that cash is either free or the bearer of small withdrawal commissions and can also be divided or aggregated up to a level that is considered acceptable by the partners. Despite all these, this type of cash transactions still have some drawbacks: cash has a " friendly behavior " towards tax evasion and its usage is not traceable. Products that carry major risks, like weapons, are processed through a personalized selling system. When pollution from a specific product will lead to the death of an identifiable quantity of people, like in the case of death caused by fire arms, the product in question …