After selling Etherpad-maker AppJet to Google four years ago, former Y Combinator partner Aaron Iba is at work launching his next project.
After getting frustrated with all of the unused gift cards he would rack up over the holidays, he started Paygarden. It’s a way for businesses that aren’t the original gift card provider to accept the cards as an alternative form of payment.
“When I was working at Y Combinator, many startups had big challenges around payments — how were they supposed to grow revenue and get more users to pay?” Iba said. “But many users don’t have credit cards, or are unwilling to enter in their credit card numbers into a webpage.”
The big vision here is that providing these alternatives helps consumers pay for goods and services online without giving up too much information about their identities or compromising their privacy.
Businesses can integrate with Paygarden by adding a link alongside their traditional credit card billing form.
Iba says he’s designed the experience to be as easy as PayPal: users just enter their gift card number and PINs. Paygarden’s platform checks the balance on the gift card and uses the remaining value for the online purchase. (You can see what the user flow looks like below.)
They’ve done deals with gift card networks covering about a hundred big retailers including Best Buy, Walmart, Target and Starbucks. (The full list of accepted brands is here.)
On the other side for redemptions, Paygarden is launching with two partners — Prizeo and Private Internet Access.
Prizeo is a YC-backed platform that channels celebrities’ social media influence into funding for charity. So now you can use your unwanted gift cards for good, instead of buying things that you may not necessarily need.
“Something like $40 billion in unused gift card value is sitting there in people’s wallets, purses and drawers. Some of that could go for charity,” Iba said.
The other company, Private Internet Access, is a VPN service provider. VPNs or virtual private networks are used by privacy-conscious web users who want to protect data on their browsing activity from outside observers. (They’re popular in China for netizens that want to get around the Great Firewall.)
This particular partnership ties more deeply into Paygarden’s longer-term vision, which is to provide an alternative payments system that helps protect identity and consumer privacy. Instead of using credit cards, people can hand over gift cards without compromising any data about who they are. Their identity is never linked with their purchase.
Iba is also exploring ideas around Bitcoin. But for now, the crypto-currency is still difficult for mainstream consumers to use or understand.
On top of protecting privacy, Paygarden helps another segment of consumers. There are some 26 percent of adult Americans who don’t have credit cards. Now they have more of an ability to make online purchases if they have gift cards on hand.
The Paygarden team, which includes Iba’s former MIT classmate George Huo and early Cardpool engineer, is bootstrapped for now.
[Image via Flickr]