Name Isn't All That's Changed at the Former Kwedit

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The company behind Kwedit, the alternative payment system with a cartoon duck for a mascot, has reinvented itself after determining that its main product didn't fit the bill.

Kwedit went live in February with two services: Kwedit Promise, which received its most publicity after it was lampooned on "The Colbert Report" for potentially encouraging kids to rack up debt; and Kwedit Direct, which let people pay in cash for online purchases at locations in their area — purchased goods would be delivered only after the money had changed hands.

Tilono Corp., Kwedit's inventor, has rebranded both the company and Kwedit Direct as PayNearMe, and has retargeted the service to focus less on e-commerce and more on in-person payments. It abandoned Kwedit Promise in March to focus its full attention on PayNearMe, which it relaunched last month.

A merchant or biller that accepts PayNearMe payments would provide the buyer with a bar code once an order has been placed; the buyer then goes into one of PayNearMe's partner retailers, such as 7-Eleven Inc., where a cashier scans the bar code and accepts the payment on behalf of the seller. Once the online merchant is notified that payment has been received, the product is shipped.

"The way to think about this is: we're prepaid, backwards," said Danny Shader, PayNearMe's chief executive.

The earlier Kwedit Promise system mimicked the credit system — users would promise to pay later for a digital good delivered immediately. It had its own scoring system based on past Kwedit payments, and urged users who could not pay to "pass the duck" to someone else, such as a parent who would pay for a teen's online purchases.

Shader said that his company's change was driven less by bad publicity — "Stephen Colbert's thing was incredibly funny," he said — but based on the actual demands of the market. "We were getting incredible pull for PayNearMe," he said. If anything, Colbert's segment provided too much publicity for the Kwedit Promise product, overshadowing PayNearMe/Kwedit Direct, he said.

PayNearMe can be broken down into two essential parts: a load network and software for payment acceptance, both developed in-house, Shader said. The network is pitched to retail locations such as 7-Eleven, and the process of accepting a PayNearMe payment is already familiar to them. "We look, to a retailer, technically like a gift-card load," Shader said.

The payments software is pitched to companies such as e-commerce merchants that want to list PayNearMe as a payment option. When integrated at the merchant's site, the checkout process ends by generating a bar code that the user is instructed to print and take to a cash-load location.

Though this system was developed for e-commerce, that "is probably going to be a minority of what we do," Shader said. Part of what drove PayNearMe away from sales of digital goods is the growing influence of Facebook Inc.'s own Facebook Credits online currency, which Facebook has been marketing heavily to developers.

Instead, billing and collections are more likely to provide most of the company's revenue, he said. One advantage PayNearMe has over conventional walk-up bill pay is that PayNearMe payments can be taken at standard cash registers at participating merchants; they do not require a dedicated customer service counter.

An advantage it has over prepaid cards, Shader said, is that it is more resistant to fraud. Shader said that by working without stored-value cards, his company avoids merchant risks such as chargebacks or cloned cards. The system is also resistant to money laundering, since there is no stored-value card to change hands after it is loaded.

This makes every player in the payments system traceable, which means "nobody's going to use us for anything illegal," Shader said. "You'd be insane."

Pricing for PayNearMe varies based on the use case, and would generally mimic the established pricing for the situations in which it is used. For e-commerce, its pricing could be similar to interchange. For bill payment and collections, there could be a per-transaction fee for consumers.

Beth Robertson, the director of payments research for Javelin Strategy and Research, said PayNearMe is entering a tough market, but there is an opportunity for it.

"From the biller's perspective, as long as they get their payments, they can be relatively neutral" about which payment provider handles those payments, she said. For that reason, billers would likely welcome PayNearMe as another payment format they can provide to consumers.

However, "walk-in bill payment, I would say, is reasonably well established," Robertson said. "There are a number of major competitors in that market."

Many billers already accept payments through the agent locations for the major wire transfer providers, though Robertson did praise PayNearMe's choice of 7-Eleven to handle its payments.

"7-Eleven certainly is a good outlet for them to be associated with," she said.

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