A recently-launched micropayments platform seeks to upend how people buy and sell digital content.

QUID, a Toronto-based payments startup founded by a Google veteran, enables online transactions as small as pennies at high volumes — in realtime.

CEO Mohit Cheppudira told Bank Innovation it’s been almost impossible to make tiny digital payments on the internet to date. He said major payments processors have not met a growing demand for viable micropayment options because of inflexible fee structures and, perhaps, a failure to see the potential revenue.

“This has caused all kinds of alternative and sometimes convoluted monetizations schemes to come up, and to be widely used, for things like digital content,” he said. “But, you still can’t read an article for $0.20 or buy a photograph for $0.30. You end up either having to buy them in bundles, or having to subscribe for something, or going to a publisher that monetizes heavily with ads.”

QUID’s platform, Cheppudira said, gives customers a seamless way to pay multiple merchants on a pay-as-you-go basis, while offering merchants flexibility to charge small amounts for content. Merchants can adjust pricing and customize other options by using slider widgets, he said.

The platform currently accepts payments as low as $0.01 and as high as $2.

Cheppudira said no other major payment processor allows customers to affordably transact at such small amounts. He said QUID is at least 30% cheaper than other payment processors for transactions under $1, and the savings increase as the transaction sizes shrink.

QUID charges 7% per transaction, but, unlike other processors, there is no base fee, which typically is $0.30 per transaction. Cheppudira said a lot of processors use base fees because the cost of a transaction for them is very high.

“Even technically, there’s a lot that goes on when you make that one kind of payment,” he said. “We built our thing from scratch just for the micropayments use case, and we also come at a time where we can take advantage of technology that they can’t because they’re just too entrenched.”

Cheppudira said one of the things about micropayments is, it’s only feasible when you can handle huge volumes.

So, how does QUID work?

Cheppudira said when customers pay by credit card, QUID doesn’t actually bill their card but rather pre-authorizes it for some higher amount. As customers continue to make payments through the platform, QUID tracks them in an internal ledger, which he said is designed for “very, very high throughput and very low transaction amounts.”

He said customers are billed once their purchases hit a certain threshold. QUID then determines how much is owed to each of the merchants and pays them directly into their bank accounts.

While the current maximum transaction is $2, QUID is exploring the possibility of increasing this to $5.

“That will probably change over time as we kind of learn how people use it,” Cheppudira said. “We are hoping to keep it under $5 because keeping it low makes it easier for us to compete.”

He explained that as the payment amounts increase, the fraud risk and costs of fraud increase.

“It’s very, very difficult for someone to launder money pennies at a time,” he said. “But, once you start raising the maximum amount of money that can be spent, then it becomes a really complex kind of problem to deal with.”

Cheppudira said the larger processors are better equipped to deal with those complexities.

“We can very easily move $100 or $200, but then we just become another payment provider and then we’d have to deal with all the other kinds of pain and complexities that we don’t have to deal with right now,” he said. “We’re trying to carve out space for ourselves. There are a lot of benefits for us to kind of stay small because it gives us a focus as a startup.”

In addition to building micropayment solutions for digital content, QUID is also working with non-profits such as hospitals on microdonations.

QUID, with an 11-employee team, has already launched in Canada and the U.S. and has plans to expand to other countries. The startup will be pursuing its Series A funding round this summer, Cheppudira said.

He said QUID’s closest competitors are more focused on cryptocurrency than fiat currency microtransactions.

“The problem is, merchants and sellers don’t really understand it,” Cheppudira said. “It’s too volatile. You buy something for one bitcoin and it’s worth half that the next day. There’s a huge burden on both users and merchants just to figure out how to transact with cryptocurrencies.”

There are many firms tackling subscription models from all angles, however. It’s worth noting, for instance, that GoCardless, a U.K.-based fintech that helps businesses collect recurring payments online, secured $75 million in Series E funding this week as it aims to build a global bank debit network. With as much as 18% of global payments now recurring, GoCardless says it aims to help subscription businesses cut down on customer churn by replacing cards, checks and manual bank transfers with automated direct debit plug-ins.

Join us at Bank Innovation Ignite 2019, March 11-12 at the Hyatt Olive 8 in Seattle. Register here.