OfferUp is quietly testing mobile payments for users of its community marketplace in Seattle, giving buyers the option to pay sellers through its app without exchanging cash — and giving itself another potential selling point over Craigslist, the widely used but hopelessly outdated titan of local buying and selling.
The OfferUp mobile payments beta is an option just in Seattle for now, not in other parts of the country where OfferUp is available. It was launched by the Bellevue, Wash.-based startup in partnership with payment processor Stripe. It’s available to beta users on transactions of $500 or less.
OfferUp hasn’t announced the feature publicly, but payments were enabled for many OfferUp users across Seattle through recent updates to the company’s iOS and Android apps.
For people who buy goods locally, it’s a major upgrade from the tradition of stopping at the ATM before picking up an item. But there’s a cost for sellers: During this trial period, sellers pay a fee of 9 percent on the price of the item. OfferUp notes that it may change the service fee in the future.
“We’re always testing new features on OfferUp and decided to start with Seattle in testing new payment options,” said OfferUp CEO Nick Huzar, responding to GeekWire’s inquiry via email. “We’re learning as we go, but there are no concrete plans to expand the beta test beyond Seattle at this time.”
It’s strictly optional. Even when buyers and sellers have mobile payments enabled, they can still opt to deal in cash instead.
Even so, the test provides a window into the potential of OfferUp’s long-term business model. The company, rumored to be the Seattle region’s only “unicorn” startup, valued at more than $1 billion, said last month that it expected to process more than $14 billion in transactions this year. The potential to take a slice of those transactions through mobile payments helps explain why investors are so interested in the company, putting $90 million into OfferUp so far.
The process of paying via the app has worked smoothly in GeekWire’s initial testing. After enabling mobile payments and entering credit card information for buying and selling, we were able to buy a bookshelf through the app and pay the seller using the mobile payment option.
Before the buyer pays a seller for an item, the app asks, “Are you with the Seller?” and cautions to “Make sure you are with the seller and have inspected this item.” If you don’t click, “Yes, I’m with the Seller,” you can’t proceed. Sales are final for buyers, with no refunds. Sellers are cautioned to confirm that they’ve received the transfer in the app before giving the item to the buyer.
In our test, the full price of the item was charged to the credit card that we had entered into the app. Sellers receive the payment, minus the transaction fee, in their designated deposit accounts. As of now, there’s no option for the seller to hold the balance in an OfferUp account to apply to future purchases through the app.
Another Craigslist rival, VarageSale, launched its own mobile payments test last year, also through Stripe, without initially charging a processing fee to sellers. Craigslist still has the edge, with a reported 20 billion page views per month, but mobile is its Achilles’ Heel, and the more these startups can cater to the popular trend, the better chance they have of mounting a serious challenge.
Listen below to GeekWire’s recent Generation App podcast about Craigslist.