PayNearMe, an alternative payments product from the company formerly known as Kwedit, has just raised $16 million in funding led by Khosla Ventures, with new investor August Capital and current investors True Ventures and Maveron also participating in the round. This brings the company’s total funding to $23.3 million. In conjunction with the funding announcement, Mark Britto, CEO of BOKU will join the company’s board of directors.
PayNearMe is capitalizing on the wave of services that are emerging for the unbanked, a group that includes 60 million individuals in the U.S. The “unbanked” refers to consumers who don’t have traditional bank accounts or cannot qualify for credit cards. PayNearMe allows people who don’t have or don’t want to use credit or debit cards to purchase products with cash at more than 6,000 7-Eleven stores in the continental U.S.
On participating e-commerce or merchant sites, consumers can use the PayNearMe option to pay for e-commerce purchases, telephone orders, loan repayments, money transfers and more. You simply place your order with PayNearMe and print out the given receipt. You then take that receipt into a 7-Eleven and they scan it and you pay in cash. Once you pay, your order with the retailer or merchant will be fulfilled.
Today, PayNearMe is launching a paperless method of paying; with a PayNearMe branded card. So on participating merchant sites, users provide their mobile number if they want to use the payments option. They can then get a free PayNearMe card from their local 7-Eleven store and reply to a text message from PayNearMe with the Card’s unique number. And they hand the card and the cash for the payment to the 7-Eleven store associate to process the transaction. As with all PayNearMe transactions, the payee is notified immediately that payment has been received.
The company began testing its form of payment for Facebook credits in August, but is now integrating with Amazon.com, Progreso Financiero, MOL AccessPortal (MOL), m-Via, Lexicon Marketing, LLC, Adknowledge’s Super Rewards, Money to Go and SteelSeries. For example, you can use PayNearMe on Amazon.com to buy Gift Cards online.
For background, Kwedit launched another payment product earlier this year, to much controversy. But PayNearMe has been able to sign up a number of high-profile merchants and is steadily gaining traction, according to founder and CEO Danny Shader (he declined to give us an exact number of how many consumers are using the payments platform).
Shader says he plans to use the new funding to expand its network of retailer payment locations (i.e. 7-Eleven) as well as add new merchants and companies who accept PayNearMe. The funding will also be used towards product development.
While the process of making a trip to a store to pay for an item you ordered online may seem convoluted, it is a viable payments option to those who don’t have access to credit. If PayNearMe continues to partner with well-known, popular merchants and payments locations, its product could take off. Green Dot made a viable business out of its pre-paid credit card business for the underbanked, recently filing for a $2 billion IPO.