“stage” the payment in advance—that is, to line up all the instructions about what should happen when she finally hands over the cash. The customer goes to any of 6,000 7-Eleven stores in the United States and obtains a free PayNearMe card bearing a unique ID number. She sends a text message containing the number to PayNearMe, which binds the card to her particular transaction. She then hands the card to a 7-Eleven sales clerk, who scans it and collects the cash. PayNearMe notifies Amazon that the payment was made, and shuttles the funds electronically from Dallas, TX-based 7-Eleven to Amazon within a few days.
It may sound complicated, but “it’s incredibly simple once you use it,” says Shader. “It’s just the complete opposite of what everyone has done before” in the cash economy, namely, buying stored-value cards or gift cards, wiring money via a service like Western Union or MoneyGram, or loading cash onto prepaid debit cards like those provided by Green Dot. PayNearMe’s cards have no value—they’re just tokens identifying each transaction and therefore bridging the gap between an online merchant’s transaction system and 7-Eleven’s point-of-sale system. Staging the whole transaction behind the scenes saves the consumer the hassle, paperwork, and fees associated with wiring money the old-fashioned way.
PayNearMe makes money by collecting a commission on each transaction from the payee, plus small convenience fees on certain types of transactions such as loan payments. In addition to Amazon, cash payments through PayNearMe are accepted by Facebook (where members can use them to buy credits for game play and other services) and a range of payment “gateways” such as PaymentVision and Money to Go.
While there’s a huge amount of complex technology under the hood at PayNearMe—such as a transaction system built to interact with all kinds of merchant backends and interfaces, while at the same time monitoring for fraud and keeping track of every penny exchanged—building it wasn’t actually the startup’s biggest coup, Shader says. That was getting 7-Eleven on board.
“The hardest thing was going to 7-Eleven and its 6,000 stores and convincing them that they should tie their IT system to ours,” says Shader. “That is an achievement for a startup, but it also reflects the fact that 7-Eleven is very forward-looking and looks at us as an innovation partner. We are very close to these guys—I talk to my counterpart at 7-Eleven more than I talk to my wife, to her chagrin.”
Ultimately, Shader sees PayNearMe and similar payment networks as a way to open up commerce to a larger cross-section of consumers, without hidden fees, and without the unused balances that are another expense of using stored-value cards. “The reality is that a quarter of the country does not have credit or debit cards, and these people are getting ripped off,” Shader says. “Why is the least affluent part of the population getting charged the most outrageous fees? That is not good, and technology can reduce the cost.” The size of the Series C round announced today, he says, “reflects the confidence the investors have in the market and the technology.”
