February 10th, 2010
Consumers Without Credit Can Get Kwedit Instead!
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New start-up Kwedit aims to give credit-less consumers the opportunity to buy virtual goods at social gaming websites with a “play now, pay later” platform using alternative ways to purchase without using credit or debit cards. Under the “Kwedit Promise,” users log-on a social gaming site like Farmville and receive digital content, such as virtual acreage or farming tools, and pledge to pay back later.
Kwedit runs on the same principles as real-world credit; users can buy online and pay later. The differences between real-life credit and virtual Kwedit are the payment process and the consequences of responsible Kwedit use. Users can pay back Kwedit via mailing cash or check, pay at a 7-Eleven, or have another person pay with a credit card; this is particularly useful for young teenage consumers without a credit card to make online purchases with.
Users’ virtual Kwedit score goes up and down just like a real-life credit score. If you make good on your “Kwedit Promise”, Kwedit will reward you for responsible Kwedit behavior by increasing your Kwedit score, which earns you credibility within the online community and increases their Kwedit limit in order to buy more expensive goods. If you default on payment, your Kwedit score will drop. This decreases your Kwedit limit and reduces your ability to borrow money, and if you consistently don’t pay, Kwedit will stop extending credit. “It’s ontological nonsense, but the money that is paid for the pixels is certainly real,” writes The New York Times.
More websites are cashing in on this growing niche market of virtual goods and social gaming sites projected to reach $3.6 billion by 2010. Other players include Boku Inc., which lets users purchase goods with their cell phones, and Offerpal Media Inc., which lets users get virtual cash for signing up for services like Netflix. As an added bonus, this is a relatively low-risk venture because even if users don’t pay back, sites like Kwedit stand to lose very little in selling virtual content. These alternative online payment systems also provide an option for consumers who don’t have credit but want to purchase online, and could also be a teaching tool for young consumers to learn about how credit works. However, the lack of real accountability to pay back these virtual loans glosses over the pitfalls of the actual credit world.
With social gaming sites becoming more prevalent and the target market of young, credit-less consumers eager to pay for extra playability and accessories, Kwedit’s “on scout’s honor” business model is far from the norm of traditional lending institutions. But it could prove to be the right approach for this growing industry. Move over Amazon, Kwedit’s virtual puppies and online farmlands are the newest hot commodities.