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As social networks become more prevalent in our lives, these sites are seeing an incredible surge in users and traffic. Thus, it’s becoming more and more pressing for the Facebooks and the like to monetize their sites. In addition, with APIs opening up and developers creating killer apps that piggyback on the respective social networks, the need for a payment processor for these types of transactions is becoming more apparent.  However, there lies a problem with the traditional payment processor that offers payment gateways for site owners to accept credit card payments on their regular e-commerce sites; these gateways can’t feasibly process payments that are under a couple dollars.  The reason being is that by the time they charge their fee to the site owner to offset their own fees as well as make a profit per transaction, they leave the individual site owners, the ones using the gateways on their sites, with almost nothing.  Transactions occurring on social networking sites would aim to monetize on things such as virtual gifts, or upgrades for an online game, or some kind of  a small purchase within an application, which would all certainly be under $1 or $2.

So there is a giant hole that is needed to be filled by a company that could provide payment processing on a small scale, a.k.a. micropayment gateways.  I dug around a little bit and saw that PayPal actually had a micropayment solution that charged %5+ $0.05 per transaction, however it doesn’t seem to be too popular (I’ve never heard of it until searching on Google nor have I seen it implemented).  What needs to be built is a gateway solution that is compatible and in fact built to be used in conjunction with social networks and other online applications.  Imagine the opportunity that exists if you could have micro-purchases made for lets say an iPhone online game application, or a Facebook one for that matter.  An incredible gold mine in my eyes.

There have been rumors of Facebook developing its own in-house payment processing system which would allow them to more efficiently monetize things such as virtual gifts that they sell, as well as offer it as a service to the developers with applications yearning for such a features.  Facebook could make a killing if they offered the service to developers at a monthly fee or a percent per transaction, much like the PayPal model.

There are enormous hurdles that need to be jumped before such a service can exist, such as security, privacy, and logistics.  Though these aren’t small things I believe the right team with the right leadership could and should have one launched (if one of the big players such as Myspace and Facebook don’t do it sooner) and make an absolute killing with it.