Have you ever been stuck in an online payment maze? You just wanted to read an article, then a paywall blocks you from finishing it. Or you try to download an image for a presentation, only to be asked for your credit card info for a monthly plan. What should be a quick task can turn into a frustrating, multi-step ordeal.

Now imagine if making small-value payments online was as easy as using a vending machine. You insert the exact amount for that item, and the machine instantly delivers—no forms, no monthly snack subscriptions, and no cashier. That's the idea behind the internet protocol x402. It brings that same instant, single-item transaction to the web. Instead of dealing with sign-ups and redirects, the website acts as the "machine" that instantly tells your digital wallet the price and handles the payment automatically. It's a machine-to-machine exchange, granting you instant access to your content, eliminating friction, and making micropayments feasible and seamless.

To understand how x402 works, keep in mind that the internet talks to your computer using codes. You are probably already familiar with one: "404 Not Found," which tells your browser the webpage doesn't exist. Another code, "402 Payment Required", was included in the original internet standards but left "reserved for future use." In 2025, that future arrived with the launch of x402, a modern protocol that gives "402" a real-world function.

Here is how it works: When you request content, the website responds with a "402 Payment Required" status code. The code attaches metadata that includes the exact price and where to send the payment. A smart wallet reads this and completes the transaction. The content is provided with no redirects, no typing in card numbers, and no friction.

For consumers, x402 promises a smoother experience. There are no forms to fill out, no mandatory subscriptions for one-off content, and no interruptions. Payments happen instantly in the background, so browsing stays seamless and invisible as if the payment step isn't even there.

Eventually, this protocol could crucially reshape how artificial intelligence (AI) works. Today's AI serves as a passive assistant, analyzing data, answering questions, and making recommendations. The next state, Agentic AI, will take action on your behalf using the x402 protocol.

However, ubiquitous adoption of the new protocol will require alignment across browsers, web servers, and payment infrastructure. Smart wallets must be secure, with safeguards against unauthorized or runaway micro-charges. Users need visibility and control, so they don't accidentally rack up lots of tiny payments. And as Agentic AI takes on more autonomy, regulators will need to keep a close eye on issues of security, trust, and compliance.

Despite these hurdles, x402 marks an exciting shift. Just as "404" became synonymous with broken links, "402" could become the symbol of a new way to pay online: frictionless, invisible, and powered by machines on our behalf. More than convenient, it could be a foundation for a new era of micro-transactions and agent-driven commerce.

Portrait photo of Chris Colson
By Chris Colson, payments expert, Atlanta Fed Payments Forum