New online payment system takes cash for virtual goods

New startup company Kwedit Inc.ismaking it easier forusers of free online games like Farmville who don't have credit or debit cards to pay for the virtual goods sold in such gamesusing cashor third-party payments.

The California-based companyon Thursdaylaunched a paymentsystem called Kwedit Directthat allows users in the U.S. to pay for their digital purchases after the factbymailing in cash, paying the bill at a7-Eleven store or getting a friend or family member to pay on their behalf through a social payment network called Pass the Duck.

The payment system isintended forso-called social games that are free to play but charge a small amount for extra features that are key components of the virtual worlds at the heart of the games. In Farmville, for example,which, with 73.8 million users daily,is the most popular game on Facebook, players can purchase virtual farm animals.

The Kwedit system is available onmore than 100 websites so far, including FooPets andPuzzlePirates. Many such sites are popular with children, who don't own credit or debit cards.

But Kwedit CEODanny Shader says that even among adults, 25 per cent of U.S. households don't have credit cards, and of the remaining 75 per cent, many prefer paying cash.

'Virtual credit system for the virtual world'

Users of the Kwedit system make what the company calls a Kwedit Promise, which allows them to play the game and pay for their virtual purchases later using one of the three Kwedit Direct methods of payment. (The retail option is so far only available at 5,800 7-Eleven stores in the U.S.)

The system works similarly to regular credit: users receive Kwedit Limits and Kwedit Scoresand are rewarded for making good on their payments.

Conversely, if users don't keep their promise, they will be given a lower Kwedit Score, which will determine whether they can continue to play.

"[It's a] virtual credit system for the virtual world," said Shader, although he acknowledged there are people who will not follow throughon their promises.

The company hopes to eventually offer its services in Canada.

According to InsideVirtualGoods.com, U.S. sales of virtual goods reached $1 billion USin 2009 and are projected to grow to $1.6 billionin 2010.