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Virtual Piggy: Loose Change

by Allie Harcharek
One or two ringtones purchased here. A $20 online gaming credit there. Without much effort, online purchases and micropayments made by children can add up to big bills for parents.

In an age where children spend increasingly more time on computers, internet-connected smartphones and social gaming networks, monitoring online behavior can be difficult. But Virtual Piggy has a solution.

Virtual Piggy is a permission-based online payment processing system designed for the youth market, says Dr. Jo Webber (pictured), chairman of the rising Philadelphia-based company. It acts as an online payment method for adolescents, giving them freedom to spend and make purchases online, while offering parents control of the transactions and safety for their children.

“In the past, kids would get very into these social games, like Farmville (by Zynga), which became very popular,” says Webber, noting an integral part of the game was buying and gifting virtual items to friends. “It became a real social environment and kids love to play them.”

“What happened was kids would take their parents’ credit card and ring up a huge bill because they didn’t know what it cost,” says Webber, recalling an instance with a different game, where a child inadvertently created a $1,400 bill.

With Virtual Piggy, that situation is alleviated by the permission-based online payments.

How it Works
To sign up, parents first make an account on VirtualPiggy.com, linking it to a valid credit card. Then, create one or more child profiles, linking them to parents’ payment info. During this step, parents can set which merchants the child is allowed to interact with, create spending limits and manage when transaction approval is required.

“That’s the idea for parents: instead of saying ‘no you can’t buy that,’ they say (to children) ‘yes you can, but you can only spend this amount per month, per week or per day’,” says Webber. “Parents will approve every transaction; they will get an email or text message saying their child is about to buy something and then approve that purchase.”

From there, parents can view transaction reports and receive alerts to approve or cancel any transactions. Users can also download the new Virtual Piggy mobile application, available free for the iPhone and Android phones.

“We’re still in the process of starting the commercial phase of the company,” says Webber, of this growing business. “We’re working with a number of big-name merchants, very recognizable merchant names.”

Virtual Piggy experts say kid spend the most in three key areas: online gaming, goods like clothing and toys, and food. With the host of merchants available, users can safely purchase products from major toy retailers, tickets and memorabilia from sports venues, concerts and events, and even an after school pizza.

As of Sept., Virtual Piggy is designated as a PayPal partner and plans to soon integrate its system into Ebay’s Magenta application, linking to thousands of merchants all at once. They’ve also partnered with Xsolla, a company that works with more than 300 game publishers including many geared to a youth market, Webber says.

A Win-Win-Win
Virtual Piggy is also the only such system also compliant with the Children’s Online Privacy Protection Act, a federal law enacted in 2000. With Virtual Piggy, no personal information about the child is ever shared and virtual safety is of utmost importance to the company.

“The idea behind COPPA was stopping websites from asking kids things to identifying themselves, to get information about them. It’s all to protect kids, a lot of common sense things,” says Webber.

The booming youth market of nearly 20 million people aged 8 to 14 an estimated $50 billion in annual spending power, the company cites, and that typical young consumer receives an average weekly allowance of $12 to spend as they please.

But unauthorized online transactions by children “contribute to friendly fraud, which accounts for more than one-third of the total fraud for online-accepting merchants,” the company says, representing a serious issue for merchants and parents.

Rather than simply banning such expenses, parents can use it as a learning opportunity, empowering children to make wise spending decisions. “If you’re just buying stuff for your kids, you’re not teaching them,” says Webber. With this system, she says, the child manages what they’re allowed to spend, how much they’ve spent and what they have purchased with their budget.

“That’s where we think it’ll be good for the kids to manage and understand their spending,” Webber says. “This is a way to protect businesses and families.”

For more information, visit VirtualPiggy.com.

Published (and copyrighted) in Suburban Family Magazine, Volume 2, Issue 9 (November, 2011).
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