PayNearMe Expands Payment Options to the Unbanked

We’ve talked a fair amount about payments, but that’s often in the context of people who have credit cards and smartphones. But what about the 1/4 of households that don’t use credit cards? That’s a market that Mountain View, Calif. startup PayNearMe is addressing and Tuesday, it’s rolling out four new options that ramp up the number of things consumers can pay for using cash.

PayNearMe, which works by allowing consumers to pay for things with cash through 7-Eleven stores, is now adding the ability to buy bus tickets, pay utility bills, top off cell phone accounts and send money overseas. The added payment services are a logical extension for PayNearMe and illustrate how big payment opportunities can be, not just for cutting edge mobile transactions but in addressing the less sexy but still huge $1.3 trillion cash economy.

PayNearMe has lined up a number of partnerships to expand its payment offerings. It is opening up to transportation companies to offer payments for tickets with Greyhound, the first partner on board. Right now, users need to buy a ticket online with a credit card or at a Greyhound ticket office. But with PayNearMe, users will soon be able to get a dedicated Greyhound card in a 7-Eleven, use their phone to reserve a ticket with Greyhound and then take the card up to cashier, who processes the cash payment and can print out a ticket using the point of sale terminal. Or users can buy online and print out a payment slip, which can be paid for at a store.

Bill presentation companies are also able to now include barcodes on their bills, allowing users to take them up to any 7-Eleven store to make payment. PayNearMe is also offering cell phone operators the ability for their users to add minutes to their accounts at 7-Eleven stores. And finally, PayNearMe has partnered with Ria Financial Services, a global money-transfer company to offer international money transfers or bill payments. Users use their mobile phone and special Ria cards to complete a transaction.

This is a big opportunity, and one that others are fighting over. Rivals Green Dot (s gdot) and Netspend Holdings (s ntsp) are also going after this market with pre-paid cards. But with the latest update, PayNearMe shows it can compete and offer a lot of value, especially for things like bill payments, of which ten percent are currently paid through cash or money orders. Danny Shader, CEO of PayNearMe, said his company is trying to bring Silicon Valley innovation to a market that hasn’t seen much improvement over the years. And it’s offering companies, especially online sites, a way to address a huge swath of people who rely on cash.

“If you think about it, you’d never own a business without a cash drawer so why open a business online without a cash drawer,” said Shader, “We’re the cash drawer for cyberspace.”

Shader said it’s open to signing up more retail partners besides 7-Eleven. But the current partnership serves the company particularly well. There are more than 6,000 7-Eleven convenience store locations around the country, putting them within easy reach of most consumers. But more importantly, PayNearMe has gotten access to 7-Eleven’s payment system, allowing it to use the stores as a platform for innovation. Shader said PayNearMe has abstracted a portion of the point-of-sale system into the cloud allowing PayNearMe to offer new services and drive traffic into 7-Eleven’s stores. This isn’t new for 7-Eleven, which offers a lot of payment options at its locations in Japan and Asia. But PayNearMe is bringing that to the U.S. and with its deep integration, it should be able to offer a lot more services through 7-Eleven locations.

It’s cool to see PayNearMe innovating in this particular part of the market. Its progress — Shader said it was able to do 50 percent more transactions in April than in March — explains how it raised $16 million in November from Khosla Ventures, August Capital, True Ventures (see full disclosure below) and Maveron. If PayNearMe can keep up the momentum, it can find a successful spot in the payments world. The mobile payment industry is far bigger than just PayPal (s ebay), Square and NFC.

Disclosure: PayNearMe is backed by True Ventures, a venture capital firm that is an investor in the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.