On this page we'll take a look at monetization streams and how they work in practice. We'll also discuss future changes.
In order to send and receive web monetization money you need a digital wallet. In order to send money you also need to be subscribed to a payment provider.
You can compare your wallet to a bank account. It holds your money, and you can transfer it to other wallets, as well as receive transfers from them. Because it resembles a bank account the company that providers your wallet must have a license to manage other people's money.
The payment provider keeps track of which monetized websites you visit, and automatically pays out the creators of those sites. You can see it as a service layer on top of wallets. It uses web monetization to do the actual transfer according to its own payment scheme.
Right now payment providers are not wallets and wallets are not payment providers. Thus, in order to participate in web monetization you must sign up for your wallet and your payment provider separately. This double sign-up is annoying, but as we'll see there are plans to abolish it.
Once you are subscribed to a wallet you receive a payment pointer that you can add to your pages. This tells web-monetized visitors where they can send their money.
Once you are subscribed to both a wallet and a payment provider you can send money via web monetization. This requires you to have a web monetization agent. Currently the Coil extension for Chrome-based browsers and Firefox is the only one, but in the future browsers may support web monetization natively. If the web monetization agent encounters a website with a payment pointer it initiates Interledger requests that send money from you to the site's creator. This money is transferred from your wallet to the creator's.
These sums are currently fixed. Since Coil is currently the only payment provider we'll use it as an example. As a Coil subscriber you pay a flat $5 fee per month. Coil pays out a flat fee of $0.36 per hour to the creators of web pages you visit. Once you have spent $4.50 in a month (which equals 12.5 hours of visits) the flat fee goes down considerably in order to make sure that you don't run out of money until the end of the month, when the fee resets.
As a site owner you will get these sums — and note that Coil pays out everything it receives; there are no hidden fees. Still, the question remains why these are all flat fees. Why can't you pay more money for Coil to divide? Why can't you tip? We'll get back to that.
Site owners can use the API to find out if a visitor is paying them. This allows them to restrict (some of) your content to paying visitors. Unfortunately, right now this is only possible via JavaScript, and it is fairly easy to work around them. In the future a server-side implementation, where the paid content is simply not sent to non-paying visitors, would work a lot better.
This model has a few obvious deficiencies. Why do you have to sign up with a payment provider as well as a wallet provider? Why only a flat rate, instead of picking your own level of monthly support? Why is it impossible to tip?
Then answer to all these question is the same: right now, no payment provider has a banking license. Therefore it is not allowed to handle your money.
Say you are a Coil subscriber and you want to send a web page creator a one-time tip of $2. You would click a button or something, and the Coil extension would initiate a $2 transfer from your wallet to the creator's. This sounds really simple but it isn't. Well, technically it is, but the problem is there are strict regulations that govern this sort of transactions.
Suppose you don't have $2 in your wallet at the moment you tip. Your wallet would have to go back to the bank account or credit card that it's connected to, and transfer the $2 from there. In other words, Coil would be allowed to transfer money from your bank account.
This sort of transactions is ruled by banking licenses. Before a company is allowed to rummage in your private finances it has to be thoroughly vetted for its security, privacy, and general trustworthiness. In addition, the company itself is required by law to gather proofs of identity, and proof that your bank account is truly yours, and more such things. They do all of this not to make your life more difficult but in order to comply with regulations and thus protect your privacy and security and make sure you have control over payments made with your money.
This process is known as Know Your Customer (KYC), and it is what makes subscribing to all online payment services a bit of a chore.
Since Coil does not have a banking license it cannot do any of this. In fact, it cannot even make payments in your name. Officially, as far as regulations are concerned, something quite different happens.
When you sign up for Coil you pay it a monthly $5 fee for use of its product, the Coil Membership. This money is not placed in any personal account, but instead goes into a big bucket of membership fees. Coil subsequently makes $0.36 per hour "donations" to the sites you visit, and this money comes from the big bucket.
The trick is that selling products or services, as well as giving out donations, is not governed by banking licenses — anyone can do it.
It is the wallet provider that you also signed up for that is allowed to touch your bank account or credit card, since they do have a license. However, these wallets are not integrated with Coil; they just serve as a sort of bank account. You cannot use your real bank account, or your credit card, because the wallet needs to be connected to Interledger. Once regular banks also get connected you do not need a separate wallet any more - but that will take quite some time.
Although you now understand why the double sign-up is needed, and why you pay a flat fee and can't send tips or other one-time payments, the situation still remains annoying. A solution is in the works, but it will take some time.
Broadly speaking, the solution is for payment providers to become fully integrated with a licensed wallet and thus be allowed more fine-grained control over your finances. Thus, the money you pay to your payment provider would go into a personal account, and any payments you make, including tips, would come from that personal account. That's the situation we want.
Here we should talk about the Fynbos initiative, but I don't quite understand it yet, and it's still not officially announced, either.
Coil teamed up with Fynbos to create these licensed wallets, and work has already started. The main problems here are that licensing is a long process with all kinds of steps and checks, and that licenses are given out on a per-country or per-region basis. Thus it is likely that the licensed wallet will appear in some countries or regions such as the EU first, and only later in others. Also, it is possible that not all functionality will work from day 1. It might be that a certain feature, such as tipping, is postponed in order to get other features online fast.
There is no firm timeline for this project yet, but the first licensed integrated wallets could appear in 2022 — it's more a matter of months than years, we hope.
It is not certain that this licensing plan will succeed, but it's clearly needed in order to give web monetization a future, so Coil is going to try. Even if it succeeds, licensing and complying with regulations is an arduous process that just takes time.
Please bear with us. We're working on it.