Why OfferUp is putting mobile in the middle of users' cash deals

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In the 25 years since eBay launched, various rival online selling platforms have emerged, and those focused on local deals like OfferUp have mostly stayed out of transactions, leaving users to work out payments in cash on their own.

But for the first time since launching in 2011, OfferUp wants to add in-person digital payments for items bought and sold through its mobile app, aiming to solve pain points for buyers and sellers anxious about closing local deals.

The Bellevue, Wash.-based startup is rolling out Hold Offers, giving sellers the option to get some assurance of a buyer’s commitment before taking the item off the market prior to closing the deal.

“This solves some of the biggest frustrations of buyers and sellers that emerge in local deals when one side or the other in a transaction cancels or flakes out, which happens about half the time,” said Nick Huzar, OfferUp’s co-founder and CEO.

Huzar cited an example where he wasted hours showing a car to various people who canceled, while another prospect was willing to lay down money to confirm interest. Buyers also benefit from knowing items won’t be sold to others at the last minute.

Using Hold Offers, the parties agree on an amount to hold the deal, and the buyer may pay on the spot with a QR code through OfferUp’s app using a linked credit card or a mobile wallet like Apple Pay, Google Pay or Samsung Pay. The seller withdraws the item from OfferUp’s site until the buyer approves and pays. Buyers can withdraw their offer and get a full refund.

Sellers using Hold Offers pay a 5.9% fee to cover the transaction and other costs.

The service adds another stream of revenue for OfferUp, which last year added a shipping option through the app for purchases made with a credit card. OfferUp also offers sellers additional promotion of their posts for a fee.

Most customers buying and selling goods locally use cash, according to Huzar. He expects Hold Offers will appeal to a subset of the app’s customers, but he predicts the company will tap into growing demand for the convenience of in-person digital payments.

“Using cash is common but it’s a hassle to run to the ATM and juggle different payment apps to transfer funds,” Huzar said.

Other platforms that specialize in brokering local sales between consumers are using a mix of payment methods.

Ebay, Etsy and Facebook Marketplace, launched in 2016, each accept credit and debit cards, bank transfers and PayPal.

Longtime peer-to-peer local marketplace selling site Craigslist and LetGo, launched in 2015, have bypassed payments support, leaving consumers to work out payments on their own.

Dallas-based 5miles, which launched in 2015, introduced the 5miles Wallet in 2016 enabling buyers to pay for items through its app with a credit card.

So far most 5miles buyers and sellers still use cash for in-person transactions, according to a company spokesperson, but a growing number are using the app’s digital wallet for 5miles’ new fast-auction feature called Dash, introduced late last year.

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