VC-backed startup Kwedit is best known for three things: for enabling people to pay for digital goods online through small amounts of virtual credit; for its silly name; and for the viciously funny lambasting it received by Stephen Colbert for both of these things.
But Kwedit’s founders and investors have had a bigger ambition for the company almost from the start: to enable at least one-quarter of the U.S. population to make remote cash transactions — from global remittances to bill paying to catalog shopping to the purchase of virtual goods in social media games.
“Basically, if you want to use cash to pay a vendor but can’t hand it to them directly, we’re building a set of services to do that for you,” Shader told me back in March.
Apparently, those services are nearly ready. In August, peHUB has learned, the company rolls out PayNearMe. According to its site, the service is targeting “25 percent of American households that don’t have a credit or debit card” along with the “75 percent who do, [but] don’t want to use them online for security, privacy, or budgeting reasons.”
Originally called Kwedit Direct, PayNearMe isn’t expected to compete with prepaid Visas, which Shader argues aren’t ideal for every situation. “You have to create an account, then load it with cash that you tie to yourself somehow to pay for things.”
Shader told me earlier this year that the “bulk case” for the service is instead arbitrarily complex payments – which tend to add up.
“Let’s say that all you want is one bus ticket from [the Bay Area] to L.A.,” he said. “To use a card, you have to buy it, load it, pay an account maintenance fee, possibly reload it.
“Using [PayNearMe] would be far simpler. We’d have the relationship [with the bus company]. All you’d have to do is call and make your reservation. Then, if you had a printer, you’d print out your [PayNearMe] slip, you’d walk into a retail store, they’d say, ‘that’s $52.40,’ and as soon as that cash drawer closed with your money in it, your ticket would be issued to you. Think of it as a long credit-card authorization. The transaction is teed up, but nothing ships until you are at 7-Eleven.”
7-Eleven isn’t a theoretical example. Shader negotiated an non-exclusive agreement with the chain earlier this year, and it gives any PayNearMe user 5,800 locations around the country through which to conduct his or her transaction. (Unsurprisingly, 7-Eleven gets a bigger cut of the transaction than does PayNearMe, though the company isn’t disclosing specifics.)
Over time, Shader had said, “we can and over time will go into other retailers.”
In the end, Shader suggested, cash will never be the dominant form of payment for anyone’s business but a small form of payment for everyone’s business — and that’s just fine with him. “We aren’t and don’t need to compete with Visa or Mastercard. We can build scale by representing a single percent — maybe a low single percent — of transactions where we can be the payment method.”
What PayNearMe means for Kwedit and its virtual credit business isn’t clear. Shader — who wasn’t available for comment today – said earlier this year that he saw that business as a distinct and, I sensed, much smaller opportunity.
In the meantime, Tilono, the holding company of Kwedit and PayNearMe, is putting to work $6.3 million that is has raised two rounds of funding from True Ventures, Maveron, and Floodgate. True’s Jon Callaghan sits on its board, along with Shader and Maveron’s Dan Levitan.