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Kwedit Gets Slammed On Colbert, But Raises $3.3 Million To Soften The Blow

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Kwedit, the innovative new alternate payment product for social games and just about any other virtual good, is on a roll. They’ve raised a second round of financing – $3.3 million in a round led by Maveron. And they were also on the Colbert Report last night. Just, not so much in a good way.

Colbert ridiculed the company as a “website that hooks little kids on borrowing credit.” You can watch the clip here.

One of Kwedit’s products is a sort of credit system. Users promise to pay back the Kwedit, and social game gives in game currency based on that promise. There’s no enforcement mechanism if the user doesn’t pay, other than a lower Kwedit score and difficulty in getting more in game Kwedit. See our overview here.

So while the Colbert clip is funny, it’s not very accurate. The company says that they absolutely do not encourage use by young children. You must be at least 13 to use Kwedit. And while Kwedit teaches users how to use credit, it’s not actually a credit product. The credit business is about charging interest over time, ideally on balances that are never fully paid off. There is no interest in Kwedit.

Kwedit says they’ve signed six new merchant contracts since launch across a variety of verticals. PokeTalk, a VoIP provider, is among them, as well as a MMO, a test prep service and a credit record protection service.

PokeTalk is using the Kwedit Direct product, which allows users to agree to pay for something online and then pay for the item by mailing in cash, or by going to a local 7-11 and paying there. Pre-paid cards also require a big up front investment in printing and distribution to get up and running.

Some of Kwedit’s partners seem to be very interested in that 7-11 angle. It’s very hard to get any kind of presence in those stores, but they can get in immediately by using Kwedit. In fact, says the company, they are seeing “tremendous interest” in the Kwedit Direct product.

Kwedit also says that they can enable charitable donations via Kwedit Direct, and neither they nor 7-11 will charge any fees for these payments. So charities looking for a new way to accept payments will likely give this a look.

As I said in our launch post, I’m very intrigued by Kwedit. It’s the only truly unique payment product I’ve seen recently and has a real chance of helping social gaming companies and other virtual goods companies increase revenue per customer in a world where only 1-3% of users are willing to open their wallet. Colbert may joke about it, but Kwedit is, actually, serious business.

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