On Tuesday night, Stephen Colbert, one of my favorite entertainers, did a very funny bit about Kwedit Promise.  Millions of people were introduced to our company and to our mascot, Kweddy. Unfortunately some came away from that segment with a lot of questions.

 

I thought it would be helpful to explain the thinking behind our offerings. Warning: this is a long and somewhat geeky post.

 

OUR MISSION

 

At Kwedit, our mission is to enable people to pay for on-line or remote transactions without a credit or debit card.  We do that with two services, Kwedit Promise and Kwedit Direct.  Kwedit Promise allows consumers to obtain virtual goods in exchange for a Promise to pay for them later using the payment mechanisms provided by our other service, Kwedit Direct.  Kwedit Direct enables payments at a local retail store such as a 7-Eleven; by mailing cash in a free, postage-paid mailer; or by allowing one person to pay on another person’s behalf using Pass the Duck, our social payment network.  There’s no notion of Promises when people use Kwedit Direct; it’s simply a way to pay for something directly, typically with cash.

 

KWEDIT PROMISE IS FOR TEENAGERS AND ADULTS

 

We are signing new partners almost every day who wish to use one or both of these services. Interest is coming from telephone service providers, e-commerce sites, dating services, educational sites, money transmitters, and, of course, on-line games.

 

None of the partners we’ve signed for Kwedit Promise allow anyone under the age of 13 to use their services, nor do we. Kwedit Promise is not for children. It is for adults and teenagers age 13 and older.

 

GOODBYE, KWEDDY

 

Some people believe our mascot, Kweddy, was designed to appeal to children. In fact, he was designed to make our name stick. Since ducks quack, and quack sounds like Kwedit, we thought he would help people remember our name.  Nonetheless, as much as we have come to love him, we’re removing him from our site and our application to eliminate any ambiguity about whom we hope uses our service.  Kweddy is leaving our site first because we can do that quickly.  It will take us a few more days to remove him from the app. He will, however, remain in our logo, since we hope the quack/Kwedit association will linger.

 

PROMISES ARE NOT CREDIT

 

There also seems to be some confusion about whether Kwedit Promise is credit.  It is not.  Promises are not loans, and we do not extend credit.

 

A little more detail:  We are a payments company.  As I mentioned, our goal is to let people pay for on-line purchases without requiring them to obtain a credit or debit card.  We do not 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.

 

OUR TARGET MARKET

 

25% of American households do not have a credit or debit card, and among the 75% who do, an increasing percentage won't use them because they are concerned about their budget, privacy, or security. We seek to serve these people. Some of them are adults and some of them are teenagers, age 13 and older.  None are children. Kwedit Promise lets teenagers and adults pay for digital content such as virtual goods.

 

THE ROLE OF PLASTIC IN ON-LINE COMMERCE

 

To understand Kwedit Promise, it's important to recognize the two functions of bank cards in on-line shopping: first, they provide access to a pool of money (via a bank account or a lender) and, second, they enable electronic payments over the web.  As we all know, if all you have is cash, you can't just push it into your computer screen when you want to buy something.  If you have access to plastic, however, you can get what you want just by typing numbers into your screen. On-line card payments are easy and ubiquitous; on-line cash payments are essentially impossible.

 

For this reason, people with cash must obtain a credit, debit or other pre-paid card before they can shop online.  If they don't have a bank account or a credit card, they typically obtain a pre-paid card, some of which are quite expensive, as this New York Times article reported.

 

KWEDIT PROMISE ENABLES TRUSTWORTHY PEOPLE TO MAKE PAYMENTS CONVENIENTLY

 

Since our goal was to enable these people to make on-line purchases without obtaining a card, we conducted a thought experiment: we imagined a world where everyone was honest and could be trusted completely.  In that perfect world, on-line merchants would be happy to ship goods to consumers who promised to send them cash in exchange.  The only consumers who would make promises would be those who actually had enough money to pay, since promising to pay when they couldn’t afford to do so would be dishonest.  Those who promised to send cash would not be burdened with the cost or inconvenience of obtaining pre-paid cards.  In this perfect world, everyone would benefit: consumers could buy things with cash if they could afford them, and merchants would sell more goods.

 

In the real world, however, not everyone can be trusted. The consequence is that trustworthy consumers who prefer cash must purchase financial instruments before they can shop on-line.  In other words, the trustworthy people end up dealing with the inconvenience and expense of buying pre-paid instruments simply to prove they can be trusted.

 

Our thinking with Kwedit Promise was that if we could identify trustworthy people, we could allow them to operate as though they were in a completely honest world, and do what cardholders get to do -- buy things electronically when they can afford them.  No one else could do so.

 

With Kwedit Promise, providers of digital goods agree, in essence, to trust everyone up to a point. That amount is called an initial Kwedit Limit. It is typically $5 or less … about half the price of a movie ticket.

 

All Kwedit Promise users are trusted up to their initial Kwedit Limits. They can obtain virtual goods up to their Kwedit Limits in exchange for Promises to pay for them within a fixed period of time.  If they do, they are subsequently trusted to buy more expensive goods in increments of a few dollars. If they don’t, they can no longer use the system. In the process, we identify who publishers can trust. And, these trustworthy people enjoy the convenience of paying without purchasing a pre-paid card.

 

In a nutshell, Kwedit Promise is a system that enables honest people who prefer cash to purchase digital content.

 

ANSWERS TO COMMON QUESTIONS

 

Given all of this, I’d like to address some questions that have been asked:

 

Is Kwedit Promise the same thing as credit? Not in any literal or legal sense. There's no loan, no interest and no obligation to repay.

 

Why, then, would anyone repay a Promise? Because they want to continue enjoying the benefits of conducting on-line commerce without a card.

 

Why did we call our company Kwedit? Promise is actually a reputation-based payment system, but only behavioral economists know what that means.  (I’ve only recently learned what a behavioral economist is.)  I simply thought Kwedit was a fun play on the word “credit”. We did not mean to imply that it was credit, although I recognize that some people may not appreciate that distinction.

 

Is Kwedit Promise good or evil? In my mind, it's good:  trustworthy people are no longer required to pay fees, lock up their cash in cards, or use inconvenient payment systems to make on-line payments.

 

Is Kwedit Promise going to get folks into debt? No. Promises are not debt. There is no obligation to repay them. The only consequence for not paying is that consumers may lose the benefits of using the system in the future, or access to the goods that were obtained in exchange for Promises. Also, Promises are small – typically $5 or less.

 

Are we going to hook teenagers on credit by exposing them to Kwedit Promise Again, I don’t think so. We are simply enabling them -- and adults – to make payments without plastic.

 

Does Kwedit Promise allow people to learn about credit? We believe Kwedit Promise has the potential to educate consumers about credit in a safe, risk-free environment, and that’s why we’ve provided basic materials and links to other, content-rich sites.  Not everyone will take advantage of these materials, but, everyone who uses Kwedit Promise will be exposed to the concepts of credit and credit scores. We believe all users will benefit from this exposure, particularly if they experience it before they are extended real credit.

 

Are we trying to convince people to buy things they can't afford? No. Since we don't lend money or charge interest, we have no incentive – nor do our merchant partners – to extend Promises to people who can’t afford to pay.  We only make money when someone actually makes a payment.  Our goal is to allow trustworthy people to use the system while blocking those who cannot or will not make a payment.

 

What about Pass the Duck? Is that a way to guilt parents into paying? No. It just makes it easy for parents to do what many already do today:  Teenagers routinely ask their parents for their credit cards so they can pay for their on-line activities. In fact, one of the most common causes of credit card charge-backs in on-line commerce is what is known as “friendly fraud”, where family members “borrow” credit cards from other family members without informing them.  Why does this happen?  Because people typically need plastic to make on-line payments.  Pass the Duck simply lets one person pay for another without handing over their credit or debit card.

 

I hope this post clarifies what we’re doing and why. I also hope our site re-design and the removal of Kweddy will eliminate any confusion about whom we hope will use our services.  Finally, if you’ve read this far, I appreciate your taking the time to understand our system well enough to make an informed decision about whether it is appropriate for you and your family.

 

Quack on!

 

Danny Shader

Stephen Colbert of Comedy Central’s Colbert Report ran a hysterical segment tonight on Kwedit Promise. We laughed our tailfeathers off. Since we launched less than a month ago, we were thrilled and amazed to be lampooned on The Word. We loved everything about it except one thing: he stated that Kwedit can be used by young kids. In fact, Kwedit Promise is for consumers who are teenagers and adults, 13 and up.

 

For a more serious review of Kwedit, check out Wired Magazine's take in GeekDad.

 

Stephen, I hope I get to meet you some day. In the meantime, thank you, and Quack On!

 

Danny

All of the Kwedit ducks (as we proudly refer to ourselves) have been pleasantly surprised and excited by the huge response we’ve received since we launched, most of which has been positive. We’ve also seen a number of comments from folks who believe as a result of an incorrect statement in the New York Times that Kwedit Promise is available to users “of any age”, including “pre-teens”. In fact, Kwedit Promise is only available to teenagers and adults who are at least 13 years old. The use of Kwedit Promise by pre-teens is precluded by our Terms of Use.

 

We reported this error when the article appeared on Saturday. It was corrected the following Wednesday.

 

As for who will tend to use Kwedit most, the best data we can find suggests that the biggest market for Kwedit are users between the ages of 18 and 34, because they are the most active users of social games.

 

Kwedit Promise is not for kids. I have 2 children (8 and 6 years old) and they are not responsible enough to use credit -- in the virtual world online or in real life. While we’ve discussed the concept of “loans” and “spending vs. saving,” I am certain that if I started talking to them about debt, FICO scores or credit limits, they would be very interested in the “spend money now” part but not very understanding of the “you must pay it back, plus interest” part.

 

Let’s fast-forward 5 to 7 years to when my kids will be teenagers. Will I let them use Kwedit Promise? Absolutely! Kwedit Promise enables teenagers and adults to learn the concepts of credit by “borrowing” and “paying” small amounts of money (normally $5 or less) in a safe and fun environment. There are no real-world consequences. Nothing they do online will affect their real-life credit scores.

 

I only wish Kwedit was around when I was a teenager! I had no idea how to use credit responsibly, and when I graduated from college, I left with a diploma and ~$10K in credit card debt. Paying that debt off was a long and painful process. I shudder when I think of how much money I spent in interest on those credit cards and what I could have done with that money, or how much it would be worth if I had instead invested it. Today I have one credit card that I pay off monthly. I don’t want my children to learn about credit the hard way like I did. I look forward to using the resources we have for parents as a starting point for discussions with my teenagers about financial literacy.

 

Also, just as I will ask my teenagers to friend me on Facebook so I can keep an eye on their online activity, I will require them to share the details of their Kwedit Promises using Pass the Duck so I can monitor what they’re doing.

 

I liken Kwedit to learning how to drive. Would we let teenagers start driving a car on their own without the experience of drivers’ education or having a parent in the passenger seat, guiding them and offering advice? Of course not, so why shouldn’t we give teenagers a way to experience the advantages and pitfalls of credit in a safe, consequence-free environment with parental guidance, before they enter a world of multiple credit card offers and high interest rates? Certainly, the consequences of poor driving skills are potentially lethal while those of financial irresponsibility are not, but the recent debt crisis clearly points to the need for better education about how to use credit.

 

The Kwedit team designed Kwedit Promise to provide a safe, fun simulation in which adults and teenagers can learn how to make Promises responsibly and pay them back. We encourage parents to use our resources, including our Kwedit Kontract, to talk with their teenagers about the pros and cons of using credit.

 

Yes, Kwedit is a business, but we believe that doing well doesn’t mean we can’t also do good. We are committed to making Kwedit a great tool for learning about the use of credit in a no-risk environment.

 

Quack On!

Loree Hirschman

As we developed Kwedit Promise, I bounced the idea off of friends, game publishers, fellow parents, potential investors, and, of course, my wife. Responses ranged from “This is brilliant!” to “This is insane!”  … to the occasional “huh?” Many were intellectually intrigued (“You’re building a laboratory for behavioral economics!”  “Kwedit Scores…what a fascinating machine-learning problem!”).  Publishers saw the potential for their businesses (“Finally a way to expand my addressable market!”).  Still others viewed Kwedit Promise through a lens of morality (“What a great way to reward honesty!” “I don’t trust anyone… no one will ever pay you back!”).

 

This feedback reinforced our view that the world is a complicated place populated with honest and dishonest people, and our system should anticipate both. We should reward honest people for being honest, and we should try to stop dishonest people from abusing the system. That’s why we implemented Kwedit Scores and Kwedit Limits – features that provide positive and negative consequences in Kwedit’s virtual world without impacting consumers in the real world in any way.

 

My wife emphasized the importance of parental oversight, so we developed the “Promise sharing” feature of Pass the Duck that allows parents to supervise their teens’ Promises, and we created the Kwedit Kontract for families.

 

A friend who has been working to resolve the debt crisis got excited about Kwedit Promise and said, rather forcefully:  “Most people have had no way to learn about credit until it’s too late. Kwedit provides an opportunity to help people learn.” That's why we promote Kwedit Promise as a safe environment in which teenagers and adults can safely learn about and experiment with the life-impacting concepts of credit scores and credit limits. It's also why we provide links to financial literacy sites.

 

Regardless of your view of the world, we hope you’ll take advantage of all that Kwedit Promise has to offer – intellectually, educationally, or, perhaps most importantly…just for fun!  As always, we welcome your comments.

 

Quack On!

Danny Shader

Launch!

 

Today is a big day for our team. Kweddy has hatched and Kwedit is here!

 

What is Kwedit? It’s a payment network that allows people who do not have a credit or debit card, or who prefer to pay with cash, to purchase digital content and virtual goods easily and safely.

 

Who do we serve? In addition to the 20+ million American teenagers who primarily use cash, another 30+ million American households lack a bank account and/or credit or debit card, or prefer not to use them for online purchases. These folks have had the desire and means to make online purchases, but have lacked a convenient and secure way to do so – until today.

 

Kwedit empowers these consumers with two services:

 

Kwedit Direct, which allows consumers to make payments at over 5,800 7-Eleven stores in the United States; by mailing cash in a free, postage-paid mailer; or by asking friends or relatives to pay on their behalf via the first-ever social payment network — Kwedit’s “Pass The Duck”. If they agree to do so, those friends or family members can use any of the “ways to pay” that Kwedit Direct provides… or they can Pass the Duck to someone else. They can even use a credit card.

 

Kwedit Promise, which allows consumers to obtain digital content and virtual goods now in exchange for Promises to pay for them later. To pay back their Promises, consumers can use any of the ways to pay provided by Kwedit Direct, including Pass the Duck. Beyond allowing consumers to Play Now. Pay Later.™, Kwedit Promise provides a safe, virtual environment in which consumers can learn about credit and develop financial literacy – with no real-world implications.

 

Here are demos of our services; please take a look, or read a more detailed description.

 

We believe Kwedit can have a huge and positive impact on publishers because our services allow a whole new group of users to purchase digital content and on-line goods: people who “would pay if they could pay but can’t pay so they don’t” … before Kwedit! We’re also excited that publishers who sign up today can accept payments nationwide tomorrow at thousands of 7-Eleven stores, via millions of mailboxes, or through tens of millions of friends and relatives.

 

If you check out the site or use our service, we’d love your feedback. We’re going to be growing and changing, and your participation will help make us better. Send us some suggestions and our kwacker-jack team of developers will get right on ‘em.

 

Quack On!

Danny Shader