Tipjoy was working on this idea at one point, but they switched ideas because they couldn't raise enough money to get certified as a money transfer agent. I still think it's a great idea. The way to make micropayments work is simply not to insist on them always being collectible, and factor predicted payment rates into your prices.
This is indeed more focused on some of the ideas you liked most. But I think one lesson learned from Tipjoy is that merchant acquisition is the hard part about making a payments system. Increasing conversion rates is nice, lower overhead from micropayments is nice, but does is drive higher revenue? You have to prove that (or something else, like great customer service) to sell to merchants.
I also think this focus on pay later doesn't necessarily work for those new to the system (i.e. everyone that matters) who could still be apprehensive and hesitant to commit to a transaction.
The use of reputation isn't new. Spare Change had a system of reputation for those who reversed transactions. They let merchants block those with low reputations. A fun anecdote is that they needed to make a reverse-reverse transaction for those that wanted the reputation back.
But let me bring it back to merchant acquisition. Amazon and Google are both having a hard time with this too. People don't want to spend development resources on a new payment processor unless they really, really need to.
That's why solutions like http://wepay.com are awesome, because they have a payment product designed for a sizable niche that really could use their services.
When you say "micropayments", were you thinking $5 ~ $10 or $0.05? I see this as being able to provide low-value payments to a clientele that can't normally access them. It fixes the major problem they have: inability to credibly demonstrate willingness and ability to pay within the constraints of an online interaction. Banked people can do this fairly easily: punch in credit card details.
(Well, technically, it really fixes the merchant's problem with that user more than the user's problem -- which is one potential stumbling block in user adoption.)
This doesn't alleviate the problem with nickel/dime scale micropayments, which is that users hate them with a passion unmatched by a thousand burning suns. That was true back when Clay Shirkey mentioned it in 2000 and is true today. The mental transaction cost makes every single microtransaction a significant barrier to conversion.
This is one reason aside from credit card fees why people who do micropayments successfully tend to use a dual currency model where the micropayment currency (bought for cash money) is as easy to spend as the currency which you can earn from ingame actions. (i.e. one-click no auth no confirm purchases, like buying something from the vendor in WoW.)
Does one necessarily have to make a purchase prior to payment? Couldn't this concept include a "wallet" as well? Just tell the Qwacker "Bill me $10", take the $10 coupon and $10 cash to the 7/11 and get credited with $10. As an option, possibly for somebody who wants to repair a bad reputation.
So basically it is a stored value card but you effect the purchase of the card after actually spending it. That is the insane part. However, since you're only using the SVC to purchase bits which were free to the company anyhow, and there is presumably no cashing mechanism, fraud-related concerns are negligible. (Oh no, extra records in my database. How ever will I cope.) Granted you're not going to get anything near 100% payout on the SVCs, but because the purchase step is later, it doesn't present a massive brick wall to conversion. And because people's Facebook identities are semi-durable, there is an incentive to pay these if (big if) the user wants to have a second bite at the apple with the same merchant or another merchant.
Branding it as the Promise-That-Isn't is probably not a great idea, though. That destroys the social norm that you'll pay for what you "promised" to pay for. That is a very, very strong social norm which is extraordinarily effective in the real world even for low-trust interactions -- for example, see pizza restaurants or sit-down restaurants. (Anybody can get a pizza created "on credit". Similarly, almost every pay-post-eat restaurant is theoretically vulnerable to dine-and-dash and yet it is rounding error on their businesses.)
Literally the first place my brain went is "Would it make sense to buy Kwedit from a business in return for cash money." For example, if Kwedit is generally ~5% collectible within 60 days, and you're a startup who is not yet ramen profitable who has rent to pay but Kwedit to burn, I might make a very speculative investment and give you US$1,000 for KW$33,000, expecting that to result in future revenues of US$1,500+. Essentially it is factoring for B2C receivables.
(And, ahem, such a stupefyingly bad deal for you that it is probably illegal in some jurisdictions. Proving once again that charging money is an excellent business model...)
You can then imagine a business selling the Kwedit of customers who they believe are not likely to be good for it (subprime Kwedit?) while keeping the Kwedit of customers they believe are likely to actually pay, which would roughly mirror the activities of a collection agency.
This is, of course, all a flight of fancy: I think the idea is likely to be massively unworkable in practice or, in the alternative, regulated out of existence.
As the article points out, and I'll highlight here, right now it's Kwedit in exchange for virtual property. That's unlikely to crash the economy no matter how large it gets, if we don't start extracting second-order derivatives from it. If you can start taking out mortgages by putting up Kwedit as your collateral or somehow start involving real assets, then yeah I think this is a recipe for more trouble.
Oh, and connecting a story from a few weeks back where the spelled-with-a-C credit agencies want to start using social networking to gather credit rating info, Kwedit is credit rating info on a silver platter. How long will it take for failing to pay your Kwedit to show up on your credit report?
It's an odd thing where it only mostly works if they don't extend it at all, but the pressure to extend will be enormous.
I'm actually most impressed by their payments via 7-11. Finding a way to transfer cash to an online account is actually really difficult, should you find yourself in that position. If PayPal accounts could be loaded via 7-11, I think that would be surprisingly popular.
Judging by the success of social games, I would say there is a "real-world" incentive to actually pay. Sure you don't have to, but then you might not be able to play FarmVille anymore! That's a real-world problem for a lot of people.
It is true, however, that you'll never not be able to buy a house because of this though. Thank god for that.
This is brilliant, especially the idea of a Kwedit score (and consequently Kwedit limit) tied to one's Facebook identity. ivankirigin, had you ever considered something like this for Tipjoy?
We did do this, but for twitter. Fighting fraud with a social graph is awesome. We planned on doing it with Facebook too, but never made it urgent. We probably should have focused more on commerce instead of P2P and non-profits, and gone for wherever the transactions were. We expected the twitter platform to grow with the usage, but I still haven't seen that. There are very few companies that build on top of twitter that ask you for money.
The 7-11 system is quite similar to the payment system for most things (specifically utilities) in Japan. I pay nearly all my debts (in cash) via a scan-able bill at a combini (convenience store).
At first it seems weird, but after awhile, you wonder how you lived without it.
This service could be very interesting, and profitable. It's gonna open the floodgates to many similar services.
I pay nearly all my debts (in cash) via a scan-able bill at a combini (convenience store). At first it seems weird, but after awhile, you wonder how you lived without it.
That seems a lot less convenient than just making an online money transfer. When I need to pay a paper bill, I log in to my bank's web site, type in three numbers from the bill (account #, reference #, amount of €) and click "send".
User A: I want $5 worth of <stupid thing> for my facebook profile
<stupid thing>-r-us: Here it is, you owe $5 Kwedit
User B : <Sign Up>
User A : Pass the Duck to User B
User B : <disappear>
7/11 scanning is a nice idea, I don't care for the name
People who go to that amount of trouble to not pay probably wouldn't have bought anything directly anyway. If nothing else they're advertising <stupid thing> to their friends for free.
I've often heard this argument regarding security and I always have trouble with it. It's really not that much trouble to scam someone and it's actually rather fun... I think people often operate in a kind of need based mode, they get it in their head they want X and so they go about going to get it, probably trying free routes before pay ones. The only exception to this is in the enterprise scenario where there could be a penalty for getting caught at something.
A by-product of this idea is the size new market it opens up. Not only does it allow adults without bank accounts to get involved but now kids - previously without means of easy online payments - can start making payments (or should I say, pay with credit).
Actually settling the debt is kid friendly also with the option to use cash (either via a 7-11 or simply mailing the cash) or by "passing the duck", presumably to a parent.
Of course, whether this is a good thing or not is another debate.
