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Gamers of a certain age may recall the catchphrase of Popeye's pal Wimpy: "I would gladly pay you Tuesday for a hamburger today." Borrowing money for something so trivial seems a bit silly -- but as of this year, virtual items can be bought on credit thanks to a Mountain View, CA-based upstart called Kwedit Inc. whose catchphrase is "Play now, pay later."
But in an age of easy credit and a troubled economy, some observers wonder whether extending credit -- or "kwedit" -- to gamers as young as 13 is appropriate.
Launched just last month, Kwedit's goal is to solve what it says is the number one problem for publishers in the free-to-play space - the fact that the vast majority of gamers, perhaps 98 percent of them, never spend a penny on the virtual items offered to them.
"One of the reasons why the typical conversion rate is 2 percent or lower," says Danny Shader, Kwedit's CEO, "isn't because the gamers don't have the resources or aren't willing to pay. There is a group of people who just lack the mechanism to do so.
"Picture someone with a $10 bill who wants to shove it into their screen but can't. They are the 'unbanked', or those who prefer to pay with cash. Or perhaps they just didn't think to buy a pre-paid card earlier in the day or they are unwilling to purchase one by phone.
"And so we needed to come up with a way to let those people who have the will and the resources make a payment. We only have to do that for a very small percentage of the 98 percent who aren't paying to generate a huge increase in the amount of revenue a publisher can earn."
Here's how Kwedit works: On websites that accept Kwedit Promises, gamers get to buy virtual items now by promising to pay up in a week or two. At that time, they can hand over cash at a store, like 7-Eleven, that takes Kwedit payments or they can "snail mail" cash in a pre-paid Kwedit envelope that can be printed right off the web.
 The amount they can "promise" in the future grows -- as previous promises are paid up. This increases their Kwedit score, a virtual version of a FICO credit score. The initial Kwedit limit is determined by the game publisher and might typically be just a few dollars.
Unlike using a "real world" credit card, there are no serious repercussions if a gamer reneges on their promise other than the fact that their Kwedit score falls -- which may adversely impact their ability to use the system in the future.
"It's a completely virtual simulation of credit," says Shader, "in a completely safe environment."
But observers anticipate parents feeling uncomfortable with their children making promises when perhaps they are unable or unwilling to pay.
Shader minimizes the problem, observing that while Kwedit accounts are for gamers 13 and older, "the largest demographic of people who play free-to-play games are 18 to 34-year olds. Why would these people use Kwedit? Not only do 25 percent of American households not have a credit or debit card, but a non-trivial number of people who do have credit cards are unwilling to use them online due to concerns of privacy, security, or just for budgetary reasons."
In addition, says Shader, Kwedit gives parents an "incredible teaching moment" to talk to their teenagers about credit, what it means, and what will "ultimately be the most important financial skill they will have to develop when they get older. That's why we're putting a tremendous amount of material on our web site explaining what this is all about."
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This farce of a system was even featured on the Colbert Report were it received quite audible disgust from the audience. Who can blame them though.
My favorite line in the whole article is this jem...
"One of the reasons why the typical conversion rate is 2 percent or lower," says Danny Shader, Kwedit's CEO, "isn't because the gamers don't have the resources or aren't willing to pay. There is a group of people who just lack the mechanism to do so."
That group you're referring to Danny Shader, they are called children and incase you don't know.. They don't need a system like this. In this statement he straight up told us that the aim of this is to put emplace a credit system that targets children.
If you can't afford to pay for the credit.. I mean kwedit lol ... you're in debt for you have the option to "Pass the duck" My favorite part of financial responsibility always has been shirking by debt of on others stupid enough to pay it.
The website even has a section for parents asking them to "monitor kwedit promises" Yes you to can make sure your son/daughter pays the pretend money they owe so they can get that virtual dog house they need "RIGHT NOW".
Why teach your kids to be patient and work for money when the lending system is so easy to use. I mean . The more kwedit promises your child breaks the less they can buy online.
Not surprisingly face book is supporting this application whole heartedly. I mean what better system could their be. This lets banks and lenders know who potentially good targets for high interest credit cards are before they are even old enough to have one.
I know this is a tad lengthy, but I thought I would just fire out this one last issue. This is quote from their privacy policy. The capitalized emphasis is added by me.
"If Kwedit concludes at its COMPLETE DISCRETION that any user detracts from this purpose, Kwedit may remove the user's Kwedit balance, and/or prohibit the user from using some or all of the Network, and/or publish its conclusion and PUBLICLY IDENTIFY THE USER in order better promote this purpose."
We have been waiting for this for years people. A privately available credit score database with Children (and their parents / family's) personal information attached to the account.
And no, as a dev it doesn't look appealing, because 99% of users will buy one thing with it, not pay, then leave.
Here's the link to the Colbert Report's piece on it. Scathingly fantastic, as always.
http://www.colbertnation.com/the-colbert-report-videos/265469/march-02-2010/the-
word---kid-owe
I am writing this post in response to some of the concerns raised in the comment stream that precede my comments.
To start, the very funny Colbert Report segment was not an accurate depiction of Kwedit, but did folks expect it to be? Kwedit is no more about hooking kids on credit than Stephen Colbert is a right-wing fanatic. To help folks who took the segment literally get a fuller understanding of what we're actually doing, I've posted a fairly long response here: http://bit.ly/aMIIBk.
Kwedit's mission is to enable consumers to pay for on-line or remote purchases without a credit or debit card.
Kwedit Promise, one of our two services, is for adults and teenagers age 13 and older. Since people have different definitions of what constitutes a child, Kwedit relies upon the Children's Online Privacy Protection Act (COPPA), which draws a bright line distinction between individuals who are 13 and older, and those who are not.
With respect to the comment about Kwedit Scores and privacy, please note the following: Kwedit Scores are private and can only be shared by users themselves. That's not just a matter of Kwedit's policy, it's dictated by law. We do, in our terms of use, reserve the right to let a publisher know if a user attempts to defraud our or their system, but that has nothing to do with Kwedit Scores.
With respect to the role of Pass the Duck, I'll quote from the blog post I've referenced, above:
"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."
In addition, Pass the Duck enables parents to monitor their teens' on-line spending within the Kwedit Promise network, something that is not true of pre-paid cards and other payment mechanisms teenagers routinely use today. As such, I believe it offers an improvement over the status quo.
I personally believe in Kwedit, Inc's mission. I also respect the right of others to disagree with me, but hope this post clarifies a few things along the way.
Danny Shader
CEO and Founder, Kwedit, Inc.
If most people fail to pay, so what? They got a few bucks' worth of virtual goods out of it and now they have a minor advantage in their game. If it encourages ANYONE to pay for virtual goods that wasn't already, then the dev gets more money.
As a parent I would feel a lot safer about my child's online presence if in the privacy policy you claimed you wouldn't share my child's information with third parties, but both you and I know there's no money in that. Again I will point out the fact that your policy threatens to publicly out a child not following "kwedits" non legally binding polices.
I also think you might want to look at your statement about pass the duck as it clearly points towards you suggesting that rather than having my child steal my credit card and use it online I should just
The bottom line is Danny that everyone sees "kwedit" for it's true potential. To data mine the online spending habits of youths and then turn around and flip that info into cash. As an added bonus you could also sell the names of children turning 18 to credit cards companies. Especially those that rack up "kwedit debts" and then just pay a small amount each month. I hear that's the credit card companies favorite kind lol.
Pick a logo that doesn't target children like an ice cream truck and up the age limit to 18 and I might actually consider taking back my statement about you being morally bankrupt. Seriously man do you think for 2 seconds people don't know your trying to get kids hooked on credit? Get Real.
"kids" don't need "kwedit"
I believe they still have a lot of work to do to insulate themselves from children's access to Kwedit, but see the potential of the service in other regards.
Although I don't really agree with the general concept being presented, the reality of modern socioeconomic classism (certainly in America, at any rate) is that everyone lives on debt, including the federal government. What Kwedit is doing isn't much different from what the government or other areas such as education funding (student loan debt or other types of loan debt) already does far more extensively. Similarly, the stock market is really just a big, formal gambling game, and there are various programs in schools that try to teach young people about financial planning via "Monopoly money" stock games.
Frankly, in my view, it's high time that we developed a different socioeconomic paradigm than capitalism because equality is impossible in a capitalistic paradigm. Capitalism isn't etched in stone and is a relatively recent development in our history. If we're so bright and innovative, I'm sure we could come up with a system where people contribute their skills freely for the benefit of others, and where we do not refuse to provide the basic necessities of life for everyone. We used to have such systems simply to survive, after all. The U.N. recently reported that over 1 billion people live in a state of hunger, including an estimated 15 million in so-called "developed" countries. As long as people in positions of power embrace such a status, I can't really agree that we have a "developed" society. Of course, people in such positions (at any level) are not starving, so they may not see things in the same light.
I agree about the need for systemic shift though perhaps the term "Capitalism" isn't the root of the problem, rather the adjective of "Financial" where all money is debt. I'd prefer a distributed form of capitalism based on equity where the means of exchange can be created and retired without interest burden.
Let me lay this out on the table: no one has "credit" cards, they are all tools to sell you into debt and indentured servitude. I think we might have to watch our backs for a Zombie Abe Lincoln to stroll up out of his grave and start attacking us, because all his hard work in America with the 13th and 14th amendments has been thrown out the window. Slavery has never been eradicated and it's a shame how it is once again legal in the forms of human trafficking (not related directly to this stuff) and debt/indentured servitude. So whether or not you care about enslaving other humans or not, let's call call it by what it is: debt. You are selling debt to people. That's all credit operations have ever sold. If you are more upfront with what you are doing, people will be more willing to do business with you, if in fact you aren't really trying to exploit them.
"We are like the Fed," he explains. "When they need more money, they print it. We do the same."
You must be aware this causes stagflation, which is a horrible problem, one of many plaguing our real economy right now. The Fed is not a good model for you, in case you were wondering. Those people that worked at Goldman Sachs, Citi, AIG, and such that killed the economy, run the Fed and continue to do so.
And once again I will stop myself. I seem to have come off more scathing than I would wish. I can't convince myself that evil finance people are in fact evil to the core and I should hate them, or else I would never attempt to be any better. Mr. Shader I want to respectfully say that I'll take time out of my busy day to chat with you if you are interested in changing your ways to make things more social just, more sustainable and less exploitative. It will benefit everyone greatly in the long run, you included. I highly suggest you take me up on the offer. Otherwise, I'll be coaxed back into the flame war going on here because I feel the need to protect those children from having their lives messed up potentially.
I think that people need to be less reckless and stupid about usage of credit cards, and that credit cards should be not so easily handed out to people who are bad at using them. But the only way to make people better is to teach them. This feels like a simpler system, with much less repercussions, that is a better place to learn.
I was personally very against the idea of Kwedit, until I read in here that you don't have to pay it back, you just suffer in your ability to continue to use the service. This provides a place where you can learn credit more effectively, but if you really mess it up, it will not follow you the rest of your life. If you have an issue with people purchasing virtual objects with real money, your issue is not with Kwedit, but rather the Free to Play model.
On the Developer front, it makes sense due to the negligible cost of producing an item. If 95% fraud the system and 5% uses it appropriately, you've still won. I don't feel that saturation will be an issue, because while those 95% can only ever make a handful of purchases, the 5% will always be there, and that is a new stream of players who could not support you before. The 95% will likely move on to new games, or new systems, because they can no longer use Kwedit. Or it is the equivalent of giving everyone in game a 25$ christmas bonus in items, as each old user maxes out his Kwedit account once, and then ditches it.
Overall, it earns a lot of nasty opinions, but it seems like a good idea. It will likely need a fair bit of refining overall, but It seems a lot better than I thought when I originally heard about it.
Credit card companies make all their money from people who carry a balance. Kwedit, as I understand it, does not permit you to carry a balance - you must pay your debt in full, within a couple of weeks, or your score suffers, quickly resulting in your inability to use the system at all if you do it too often. I think Kwedit could actually have a positive effect, in that it would get the users in the habit of thinking of credit as a convenient means of paying for something that they DO have the money for, not a way of going into debt in order to acquire the things they WISH they had the money for.
Anyway, there are a lot of potential problems with the system, but I think the biggest is exactly what we're seeing here - that the idea itself provokes a strong negative reaction in people before they've even got the gist of how it actually works. Even Daniel James, one of the only two devs to adopt the system, admits he initially had misgivings about it, until he "got his head around it," as it says in the article. I think 99% of parents won't even try to get their heads around it, and that the idea will fail for that reason.
Still, I don't think Mr. Shader is deserving of the sort of condemnation that's been tossed his way in this comment thread... he's not out to stick a bunch of 14-year-olds thousands of dollars in debt, or train them to be slaves of the credit card companies as soon as they turn 18.
Per Alex's point, if Three Rings is using the system, I'll give it the benefit of the doubt. I have a lot of respect for Daniel James.
Still, it makes the hairs on the back of my neck stand up.
@Danny Shader: I forgot to leave contact info. Sorry, here it is: apyoungblood@gmail.com (I'm risking getting signed up for spam bots for you, so I hope you know I'm serious here. And FYI to the rest of the interwebs, I would greatly respect if said spam bots do not attack my inbox). I want you to know that I am serious about sharing my thoughts with you and helping you fix issues of social responsibility and justice such that you can create a sustainable business that will continue to profit you. I believe that the only way to right the wrongs of our present economy and financial systems is to encourage good practices with everyone and offer help relentlessly to those who enact or insist on exploitative and/or poorly thought out bad means of doing business. I'm not saying you are a bad person, we are all capable of bad things. I'm certainly no exception. But we are both awful people if I don't respectfully offer to help you to the fullest extent I am able and you do not accept and learn and grow.
@Everyone: I got into making games partly because I love it and partly because I want to change the world for the better (not to be confused with taking over the world, which I joke about at times, but in all honesty do not want to do). The status quo is not all bad, but on the flipside it is severely lacking in many areas that need help. I intend to do as much as is possible for one man to fix that and no more, no less. Let's all work toward that goal!