Kwedit Where Credit is New
Silicon Valley startup Kwedit believes online retailers are neglecting one-third of the U.S. population—the unbanked, underbanked or people who just prefer to pay with cash.
This demographic shops online, but with no credit or debit cards cannot easily make purchases on e-commerce sites. Through Kwedit, consumers can select “Kwedit Slip” on the site’s payment page, print out the purchase information and take it to a bricks-and-mortar retailer to pay with cash. Once the payment is processed, the retailer’s POS software completes the sale and the e-merchant begins the shipping process.
This solution came about when Kwedit observed the rise of social gaming on Facebook. In February, the company launched a payment platform for virtual goods for online games. The service allowed users to pay later, and the non-legally binding promises had an initial repayment rate of 25.9 percent. The service drew initial scrutiny: CBS referred to it as “toxic” and on his March 2 “Colbert Report,” Comedy Central’s Stephen Colbert said, “I know that it sounds like a website that hooks little kids on borrowing credit, so let me explain. It’s a website that hooks little kids on borrowing credit.”
In response to the criticism, founder and CEO Danny Shader reiterates that Kwedit doesn’t “provide credit, lend money, underwrite loans, charge interest, impose late fees, levy account maintenance fees or do any of the other things that make credit cards expensive and problematic for so many people. Instead, we facilitate payments for people who want to make on-line payments with cash, and we try to make that as easy as possible.”
Negative remarks from mainstream media have largely abated. One report compared Kwedit’s financial industry innovation to those of E-Trade and Intuit, and the payment solution could help retailers tap into the multibillion-dollar cash-paying demographic.
Providing cash-in-hand for merchants
Raja Doddala, director of new business development for 7-Eleven, says the Kwedit system is not just a tactic, but part of an important strategy to reach the 18- to 25-year-old target audience. 7-Eleven currently takes Kwedit payments for online games and hopes to offer the solution systemwide by August.
“A lot of large companies largely neglected this market segment,” Doddala says. “It has been growing and there is a lot of need.”
Shader says Kwedit is a viable option for anybody who prefers cash payments. “For the merchant, cash is in hand at register before we signal to ship, and that means there is zero fraud and zero chargeback.”
While the benefits are intriguing, selling companies on targeting the underbanked could still be a difficult task. This demographic is quite misunderstood, Doddala says, thought to be poor, uneducated and lacking disposable income.
“Underbanked does not mean they don’t have money or a computer,” he says, and “they want the same thing you and I do. It’s just difficult for them to do.”
Shader once ran Accept.com, a pioneering consumer-to-consumer payment service acquired by Amazon in 1999, as well as Good Technology, which Motorola acquired in 2006. Kwedit’s software architect, Steve Capps, has more than 25 years’ experience developing software for Macintosh, Newton and Internet Explorer browsers; he designed Mac’s graphical user interface and was recognized as an Apple Fellow in 1994. Other Kwedit members include a business process engineering leader formerly with FedEx Kinko’s, a former Motorola consumer-focused technologist and a renowned gaming developer. Its investors include True Ventures, F&W Investments, Kapor Capital, Maples Investments and Maveron.
Doddala says Kwedit’s staff is a major reason it has become an important strategic partner for 7-Eleven.
“They assembled the best-in-class technical folks in Silicon Valley,” he says. “They know everybody over there [and] are able to make technology possible very fast.”
