Startup providing “kwedit” to people without credit or debit cards

Kwedit (pronounced qwe-dit) is a new startup. Its focus is to help teenagers and other people without credit or debit cards to buy virtual goods online. It works like credit: a buyer promises (Kwedit Promise) to pay later in order to get an item now. If the buyer keeps his (or her) promise, the buyer’s Kwedit score goes up. This will enable the buyer to borrow larger amounts of money. If, on the other hand, a buyer doesn’t fulfill his/her promise, the score will go down.

Since virtual goods have no “real” value, buyers real credit score (for credit card applications or for buying a house) is not affected and the debts are not enforceable. Kwedit can be paid off through the mail, by paying cash at 7-Eleven stores, or by using a credit card from a friend/parent.

According to Danny Shader, CEO of Kwedit, it could broaden the market for virtual items and even teach kids about real credit. Shader headed Accept.com (a developer of online payment systems) before Amazon.com Inc. bought it in 1999.

Kwedit is not the first company to come up with a payment system for those without credit or bank accounts. San Francisco-based Boku Inc. lets users pay for virtual goods using their mobile phones. And many stores sell prepaid cards that can be used for online purchases. Kwedit is currently available on 100 social games, and also as an option on Social Gold.

The target audience for Kwedit and Boku is large - according to the Federal Deposit Insurance Corp., an estimated 9 million U.S. households have no checking or savings account - and thus no debit card to go with it.

The idea of virtual buying is appealing to many. Just look at the popularity of games such as "Farmville" and "Pet Society" where users play for free. It’s the sales of virtual add-ons such as seeds and farmland that rake in millions of dollars. According to social games developer Zynga said its players raised more than $1.5 million for Haiti earthquake victims in five days by purchasing virtual items.

If Kwedit’s business model will be successful, gaming companies will be quick to follow. But also companies providing virtual goods and services, such as online music, will embrace the concept. Michael Arrington of TechCrunch wrote: “I’d love to pay for music on iTunes or MySpace music via Kwedit. At some point, we may just be able to.”

We will have to wait and see…..