Red Herring reports that Paypal is slashing its fees for microtransactions, finally admitting that its charge for digital goods is just too high.

"The digital content to be covered by the service would include video games, online greeting cards, news articles, mobile phone content, and music. PayPal has already been working with digital music providers to process small payments, a typical example being the $0.99 payments for iTunes.

PayPal's transaction fee is typically volume-based, and ranges from 1.9 to 2.9 percent in addition to a charge of $0.30 per transaction. In the case of micro payments, which PayPal describes as payments of less than $2, the fee is 5 percent plus $0.05 per transaction."

While this will certainly help the sales of digital music - and perhaps even digital images and ebooks - it may have the less desirable effect of allowing one of the web's most hated companies to further dominate this field. We can only hope that the Google Wallet rumors are true. [via Robin Good]

Update: Maybe Google Wallet isn't preferable to Paypal - take a look at this Google fight I just created!

This article has been contributed by Creative Reporter - Pete. Pete Cashmore is an entrepreneur and internet expert. His favorite buzzwords are Ruby on Rails, AJAX, blogging, Googlezon, home fabrication and RSS. He has a personal blog at mashable.com.