Rixty Solves Credit Problem for Virtual Goods

What the Coin-Op System Means for Online Gamers: No Credit Card? No Bank Account? No Problem

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SAN FRANCISCO (AdAge.com) -- Founders of virtual-currency company Rixty were working on a virtual world when they ran into a problem: users eager to get into the world but too young or too broke to get a credit card required for the game.

The game, called vSide, is a music-focused virtual world targeted at teens, many of whom don't have credit cards. Then there are the horror stories like that of a 12-year-old who racked up a $1,400 balance playing Farmville on his mother's credit cards. Then, of course, the economic collapse of 2008 made paying for virtual stuff on credit seem, well, wrong.

"These events expanded the need that [founder and CEO] Ted Sorom and [founder and VP-Engineering] Don Ferguson saw for non-credit card-based virtual currency," said Joel Andren, Rixty's director of marketing. "After the recession, people started looking at credit differently."

The way Rixty actually went about it was an ingenious mix of high and low tech. Not only do users not need a credit card, they don't even need a bank account. Messrs. Sorom and Ferguson have reduced the payment transaction down its lowest-common denominator: pieces of silver. Gamers take coins and insert them into any of 10,000 participating Coinstar machines around the country. In return, they get a 16-digit PIN to enter into practically hundreds of online games managed by a Rixty partner.

And, as we all know, these games aren't for children. The average age of a Rixty user is actually 26 and 70% of users say they do not have a credit card. "What we found was that on a very personal level, people have rebelled against the notion of credit cards, as well as rejection of the notion of spending money you don't have," said Mr. Andren.

But it's not only players who either don't have or don't want to use credit. Some would rather keep the fact they're spending real money on virtual games to themselves. "For example, a man didn't want his wife to know about his FarmVille habit. He didn't want credit-card statements," Mr. Andren said.

"I find it's easy to use, fast and very convenient," said 22-year-old gamer and Rixty user Miles Carr, of Tulsa, Okla., who plays online game "Dark Ages" but doesn't have a credit card and lives far away from retail outlets. "If I want to play something that costs money, I typically have to grab some cash, get in the car, drive to the mall," Mr. Carr said. There, he would buy Visa Giftcards to use online. "The driving part of that takes forever," he said. "It takes an hour or two, uses gas, and is sometimes a hassle."

But then Mr. Carr found a convenience store near him with a Coinstar machine."It's cheaper and faster. After the first time of using Rixty at the Coinstar, I was hooked. I'll never use any other method of registering my game other than Rixty. I'm completely satisfied, and that has to mean something coming from a 22-year-old male."

Rixty has more than 50 partners that see it as a revenue stream that was previously unavailable. In addition, parents cannot call Rixty, the game company, or the credit-card company to say, "I want a refund on the money my child spent without permission." Rixty declined to say how much it charges per transaction, but said while it was a lot less than a mobile transaction with a company such as Zong, it was close to -- though a bit more -- than what an average credit-card transaction costs.

"We are currently processing thousands of transactions a day and are on pace to process eight figures in transactions next year," said Mr. Andren.

But by far the biggest recipient of Rixty dollars is Facebook. Rixty said its users spend more than $30 a month and nearly $28 of that goes to games on Facebook. They get started right away -- 75%t of users fund their accounts within 24 hours of creating them.

So go ahead. Get those virtual radishes. There's no interest.

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