Tuesday, February 9, 2010
Fun with micropayments and microcharges
Jeffrey Friedl accepts donations as low as $0.01 for his Lightroom plugins. He says for donations that low, Paypal takes all of it as processing fee and he gets nothing, but he’s cool with that. I found this most intriguing and had to try it. PayPal lets me send money in US dollars or rupees, but my rupee transactions started failing after Verified by Visa and Mastercard SecureCode were made mandatory in August, so I paid in dollars. $0.01. It went through. Nifty! (To be fair, I was registering three plugins and didn’t have the heart to do this all three times.)
Minutes later, HDFC Bank sent me an SMS receipt for the payment. They charged me Re 1. One rupee is roughly two cents, but PayPal had asked for and received only one cent.
Question: Where did the other cent go? I know it’s part of the processing costs and is too small for anyone to be bothered about, but that’s not the point. How is this missing cent accounted for? PayPal didn’t receive it, and I sent it, so it’s somewhere on HDFC Bank’s books. In a physical cash transaction, it’s normal to round off to the nearest rupee before it goes on the books, but this transaction was handled by software that rounds off to Rs 0.01, the minimum unit of currency your bank recognises. Where’s my 50 paise?
Here’s the best part: HDFC Bank tacks three additional charges on every foreign currency transaction: a currency conversion charge, service tax on the currency conversion, and education cess on the service tax (tip of the hat to our world-famous Indian bureaucracy). What’s your guess on what these charges are going to be for the $0.01 transaction? Remember, they’ve already charged me 100% over the actual payment.