Its new marketing agreement with First Data Corp. seems to confirm Peppercoin Inc.'s growing stature in the world of small payments.
First Data, of Greenwood Village, Colo., is one of the largest transaction processors. It will offer Peppercoin's micropayment aggregation software through the merchant acquirers who broker its services.
The deal, announced last Wednesday, and a similar one announced Jan. 10 suggest that payments companies are becoming more interested in small-value transactions, which they historically have ignored as unprofitable.
Mark Friedman, Peppercoin's president, said merchants want an economical way to accept debit and credit cards for micropayments, which he defines as involving purchases worth less than $5. The need is especially strong among Internet merchants, he said, because credit card interchange fees devour much of the profit on small transactions.
At stores, he said, a rising number of consumers would rather use their credit or debit cards than cash for such purchases.
Peppercoin's software aggregates multiple credit card transactions, treating them as a single transaction that incurs a single interchange fee.
The agreement announced Jan. 10 was with Chase Merchant Services, a joint venture of J.P. Morgan Chase & Co. and First Data. Peppercoin, of Waltham, Mass., also sells its software through Moneris Solutions Inc. of Buffalo Grove, Ill., the U.S. arm of Canada's largest debit and credit card processor.
Several major online merchants are already using aggregation for micropayments. Apple Computer Inc., which sells 99-cent music downloads, developed its own aggregation payment software.
Changes that some merchants have made to their business practices help them avoid multiple fees for small transactions.
For example, some online game developers bundle several small games together.
Last week Peppercoin updated its software with a new version that supports three additional modes of payment: before a sale, after, and by subscription.
Mr. Friedman said the additions will enable merchants to experiment. For example, he said, cities with electronic parking meters could encourage bulk purchasing by giving discounts; motorists might end up parking longer - and paying more - if they were not worried about getting a ticket for an expired meter.
Subscription payments are especially well suited to online shopping, Mr. Friedman said, and many of Apple's competitors in the digital music world already offer such subscriptions. Merchants might even "come up with a subscription program for things like coffee," he said.
The post-sale mode of payment involves sending buyers a single bill to pay for multiple purchases.
Ed Kountz, a senior analyst at TowerGroup Inc., the Needham, Mass., market research unit of MasterCard International, said the First Data contract is a significant win for Peppercoin. "First Data is a strong name and a large player," he said.
Mr. Kountz said the new software features could widen Peppercoin's appeal to merchants that are still trying to develop a micropayment strategy. "There is certainly opportunity in the micro market," he said.
