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."