Saturday, February 6, 2010

Kwedit Makes It Easy for Kids to Shop for Virtual Goods

The startup Kwedit is getting some media attention lately. From the New York Times:
A new payment option for anyone without a credit card or a debit card, no matter how young, has just become available. It’s initially offered by FooPets and Puzzle Pirates, online game companies that are business partners of, a start-up based in Mountain View, Calif.
Minors as well as adults can buy items in the games with a “Kwedit Promise,” which can be paid off later in a number of ways — with a credit or debit card, for example, or with cash sent in a mailer that Kwedit supplies.
But here’s an entirely new payment option: A user can print out a barcode and head to a 7-Eleven store, which will accept cash, scan the code and notify Kwedit that payment has been made. In the next three months, a Kwedit logo will join those for credit cards and other payment methods on the doors of all 7-Elevens, a company spokesman says.
Of course, many of these promises will go unpaid. But since the items being purchased are virtual goods, there is no marginal cost to producing them, so any revenue generated is a win for the companies.

The system is brilliant because it makes it fun to give the company money. It also somewhat guilts the parents into compliance, as they can use the opportunity as a life lesson about responsibility.
In addition:
Kwedit’s system rewards users for repayment. Initially, the credit extended is modest, only $2 to $5. And a Kwedit score, modeled on a credit score for use by game publishers as a guide to how much credit should be extended, is set low.
That way, the system cannot (easily) be continuously exploited.

I've always been fascinated about how the Internet creates more opportunities for gains from trade. For example, I can buy a textbook from someone in Kansas who doesn't need it anymore; previously, there was no way for us to find each other. The potential to sell directly to children without the use of a credit card opens up even more opportunities. However,  some may argue that children should not be allowed to consent to making payments (some of the virtual items, though not most, cost hundreds of dollars), even though the promise to pay is unenforceable.


Loree Hirschman said...

Hi Greg,

I work at Kwedit and I'd like to clarify one point that Randy's column somewhat misrepresented. This service is only available for those who are 13 years old or older. It is not a service for "children" but for the primary users of social games, who are primarily teenagers and oung adults in their 20s.

Greg said...

Thanks for the clarification. I'm guessing there's legal issues at play here.