The service lets users promise to pay later in lieu of a direct credit card payment when they want virtual currency for social games like Farmville. It’s not a legally binding promise, but users have an incentive to pay amounts owed because that allows them to get more virtual currency through the service. Users can pay by, among other methods, mailing in cash or paying at a 7-11.
When the product first launched they had no idea what percentage of promises would be repaid. Anything at all is incremental revenue to game publishers, and since the stuff they’re selling has no marginal cost (virtual currency), it’s all upside. But after nearly two months of being live, they say the repayment rate is 25.9% If you’re a credit company that would put you out of business.
But for game publishers, that’s a staggeringly attractive monetization option. Hopefully the company (or its partners) will also disclose the monetization rate as well down the road. Because right now game publishers are only able to get cash out of 1-3% of users. If they can get another few percent to pay via Kwedit, and 25% of that money is actually paid, revenue from games can double or more.
Founder Danny Shader posted a long response here. But the short version is this – the criticism is ridiculous. It’s coming in one case from a competitor (the Huffington Post article was written by the CEO of a company that promotes Visa cards to teens and adults, without any sort of disclosure on the conflict). And the author of the CBS article doesn’t appear to actually understand the product and seems more concerned with getting parents all worked up.
The really scary stuff in social games was the Scamville nonsense where teens and pre-teens where being tricked into putting long term subscription charges on their parent’s cell phone and credit card bills. Kwedit isn’t even close to that kind of evil. It’s simply a very clever way of monetizing social games, and the most innovative new payments product I’ve seen in a very long while.