Friday, February 05, 2010

Kwedit: payment for virtual goods

The most interesting new E-Commerce play that I've heard of in at least 15 years is Last fall, a friend was sounding me out about a consulting opportunity, and told me what his company was up to. My reaction was "I'll do it if you pay me at least half in equity." We weren't able to work out terms before they found a different way to solve the problem I might have helped them with, but I haven't been able to talk about the company and what they're doing until now. They're building a payment system based on credit for virtual goods. That combination lets them tell the publishers that there's no need to eliminate fraud--as long as customers have enough incentive to pay that it leads to incremental revenue, you can stop worrying about the customers who don't pay. People who run up their "kwedit" account in a virtual world building up a character aren't going to want to abandon their character, and in order to continue using it, they'll have to settle the bill. The other amazing thing Kwedit has done is to figure out lots of ways to let people pay. By making it straightforward for people without credit cards or checking accounts to pay, they'll be tapping into a vast, under-served market. Their biggest coup to date is that they have 7-11 signed on as a major partner. You can take your outstanding kwedit balance, print out a bar code (or maybe download it to your smart phone) and take that to a 7-11 store, where you'll be able to pay for it, just like it was an item on their shelves. Users can also send cash or a check in a business reply envelope they print themselves or have a friend or parent pay the bill using a credit card. With this payment mechanism, Kwedit doesn't need any strong identity guarantees for their customers. You can create a pseudonymous account, and as long as your kwedit account keeps getting paid off, no one else has to know who you are. They went live on Wednesday, and have had some favorable press. I think they've got a better chance of making this work than anyone else in the payments space. It's a sub-market, but I think it's one that no one else is targeting.

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