Microsoft Points were introduced a while back as a way to facilitate transactions in Xbox 360 Marketplace. Microsoft claims that Microsoft points will finally enable affordable micro-transactions. Because all online transactions cost money to process, small transactions have traditionally not been practical or affordable. It doesn’t make sense to sell something for a few cents when most of the cost will be eaten up by processing fees. By translating dollars, pounds, euros, and yen into Microsoft points first, Microsoft can facilitate extremely small monetary transactions at almost no cost. Essentially, Microsoft pays the transaction fee on the initial conversion, then processes subsequent transactions directly without going through the traditional middlemen (banks, credit card gateways, etc.).
