Minno Seeks to Become a Big Fish Among Processors of Tiny Transactions

Probably no pathway in electronic payments is more littered with the wreckage of failed processors than that of micropayments. But recent moves by publishers to charge for content is helping fuel renewed interest in the business of processing tiny transactions. Google Inc., for example, has developed a micropayments engine to help publishers decrease their dependence on advertising revenue by collecting fees to read articles online.

The latest entrant is Minno Inc., a Palo Alto, Calif.-based startup looking to leverage social networks like Facebook, which were nonexistent or under-developed during the last, mostly ill-fated wave of micropayments startups in the mid-2000s. “We think what we have going for us is largely a matter of timing,” says Calvin Young, cofounder and chief technology officer at Minno and an ex-Google Inc. engineer.

Minno, which started its beta phase late in March, has four merchants live and is “in the works’ with a couple dozen more, Young says. The company will not disclose how many users it has. It’s offering free processing during its beta, but will likely levy merchant fees around 10% per transaction, Young says. It got a shot in the arm earlier this year when The New York Times, whose content had been free online, re-launched its site with a paywall. Minno, which started offering The Times’s content at a nickel per article, got a stern cease-and-desist letter from the newspaper but earned enough publicity to stir up interest with potential merchant clients. The “experiment,” as Young calls it, also established that “a lot of users are ready and willing to pay a nickel to read an article.” Minno did stop, and sent the Times a check for $33.85 to cover all of the transactions it processed.

For now, users must have a Facebook account to use Minno. Through “Facebook Connect,” users of the network can enable the service by giving it permission to access their stored Facebook details, easing account set-up and eliminating the need to remember or use passwords. “We’ve reduced the signup process down to a few clicks,” says Young. The Facebook link also allows Minno to better control fraud risk, Young says, since the social network can calculate a probability of whether the person behind the account is real or not.

Users fund Minno with a credit card, which the company charges in $5 top-off increments whenever it’s depleted. These increments allow Minno to absorb card interchange, which otherwise would leave little or nothing for content sellers at very small transaction tickets. The need for a card may bar gamers, many of whom are younger consumers, from using Minno, but Young says these users aren’t the company’s target audience. “If they don’t have a credit card, it’ll be pretty tough for them to buy anything online any way,” he says. Calling the online-games market “congested,” Young says Minno’s two target markets are journalism and Web apps.

Minno’s timing may be fortunate, especially with the rise of social networks, but much will depend on whether the startup can sign up a wide enough variety of content providers, says Rene M. Pelegero, president and managing director of Retail Payments Global Consulting Group LLC, Woodinville, Wash. “I keep going back to what is the content,” he says. “They need to sign up enough content providers to make it attractive to users to tie up five bucks.”

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