My focus for today, ORCA, which stands for “Optimized Real-Time Currency Application”, claims to be “the world’s first social-commerce (S-Commerce) transaction processing system with an open API architecture designed for social media communities”.
The concept behind ORCA, published by oneTXT, Inc., is a variation of what are called “stored value systems.” In stored value system, or SVSs, a sum of money is held in a user account and through some kind of debit system, funds are transferred from that account to pay for goods and services. The most common form of SVSs are gift cards such as those used by Lowes or iTunes.
Unlike most SVSs, ORCA is not based on an underlying credit card-type system but rather provides a complete end-to-end solution. OneTXT argues that because the architecture of ORCA is a streamlined, real-time system as opposed to the legacy, big batch processing architectures of credit card processors the operational overheads are very low and they claim “We offer more features and value at up to 50% lower rate than our competitors.”
This architectural difference is an important distinction because it makes something we all thought would be huge by now, namely micropayments, potentially practical and cost effective.
Micropayments (often abbreviated to u-payments for want of the letter Greek letter “mu”), the exchange of very small amounts of money (as small as a fraction of a cent), were, at the end of the ’90s, expected to become a huge market and predicted to stimulate new forms of online commerce, for example, allowing consumers to buy access to content such as a single newspaper page or a photograph.
Alas, the various micropayment services that were developed never really took off for a number of reasons: They were usually complex to use because of security issues and architecturally separate from the sales channel they were supposed to support. That led to operational problems that seriously limited their real-world viability.
Another argument for why there was a general failure of micropayments is the “mental transaction cost” argument: “each price, no matter how small, carries a burden of deciding if the content is worth that price; accumulated over a large amount of content, this burden would pose an extreme inconvenience to the users.”
While this latter issue is true for much content (iTunes demonstrates what is thought to be the lower limit, $0.99 per track, for successful micropayment pricing) a market that isn’t constrained in the same way is the world of online gaming.
In online games goods and services may be purchased from the game or from other players and the exchange rate between in-game virtual currency and the real world can result in what are fractional real-world money amounts. These real world values are, in effect, transparent to the consumer so, for example, a “sword of power” might cost 1,000 in in-game monetary units which to the consumer might seem costly but which might translate to a real world value of $1 … the user’s perception of value is based on different criteria and so the real world value is less important a factor.
Another situation where micropayments become effective are rewards programs where users accumulate small amounts of money for specific actions, for example, in loyalty programs, until they reach a cash-out threshold.
One of the key values of ORCA is its support for transactions using mobile devices. The clever part of this service is that just the mobile device number can be used for validation making the transactions very “low friction”. What makes such apparently weak security practical is a set of business rules enforced by the ORCA platform that can determine the context and attributes of the transaction to allow or deny its execution.
For example, to buy more chips in an online poker game that is ORCA enabled would only require the user to make the purchase request signed with their cell phone number without leaving the game. The validity of the transaction would be confirmed by their login context but perhaps limited to a maximum of, say, $10 without additional verification.
ORCA has only just been launched so detailed information on the developer’s API and the platform specifics wasn’t available at the time of writing. If you want to find out more you can apply for one of the limited number of beta accounts.
The challenge for OrcaOne is to get as many service and goods providers as possible using ORCA so that the system is well-understood by consumers. It also has to become ubiquitous so that it applies not only when you’re playing online poker or buying a sword to defend your MMORPG clan but also when you want to download a song from iTunes.
ORCA is one of the most interesting payment services I’ve been pitched in a long time and it could, perhaps, be the first one to make micropayments a real market force.
