Dwolla Providing Payment Alternative to Credit Cards and Paypal

Dwolla is an exciting new startup working with payment processing. It is leveraging its access to social networks to challenge the traditional domains of Paypal and credit card providers. Instead of a fee based on percentage, Dwolla charges a flat fee of $0.25 regardless of transaction size.

Founder Ben Milne describes the functionality in an interview with Business Insider:

 "With Dwolla, payments are made directly from your bank account.  No credit or debit cards are allowed.  And because they don't exist in the system, we don't have to bring the fees into the system. 

You can spend any amount of money and when you do that, the person on the other end doesn't have to pay 1, 2, 3 or 4%. They only pay $0.25 a transaction, which is especially helpful when it's $1,000, $2,000 or $5,000 transactions.  Obviously PayPal becomes very cost prohibitive with those larger transactions. "

"you can send money to anyone.  Only the person sending it has to have a Dwolla account to initiate the transaction.  The person receiving it will have to sign up for an account, but we've been surprised at the conversion there.  It's worked relatively well.  

We leverage social networks really heavily as contact lists, which is one thing we do really different.  You can send money with an email address or with a phone number, but the most popular way to do it is to connect to Facebook and type in a friend's name."

According to own estimates, Dwolla is particularly strong in the B2B sector. Only 11% of all transactions are taking place between private persons. Dwolla is currently processing transaction volumes from between $30 - 50 million per month. The estimate for next year is $350 million.

Dwolla also supports payments via smartphone:

"We take the website, plop it into the cell phone, start adding proximity solutions so you can see which Dwolla merchants are close to you, and then make it easy to pay once you go into a store that accepts our system. Dwolla uses the GPS feature and allows you to make a payment in real-time."

"you'll just walk into the store and pay.  It's like checking in on Foursquare, you're just paying instead of checking in. We started in one coffee shop and now we're working with 400 or 500 merchants."

In September, Dwolla developed an integration to LinkedIn, which raised their number of transaction interfaces to seven:

"With these additions, there are now 7 ways to send money via Dwolla: Dwolla ID, Facebook, Twitter, email, SMS, Proxi and LinkedIn."

Just recently we reported on Square, who as opposed to Dwolla are betting on credit card users and have used their software solution to also enter the payment processing sector.

Related posts:

• How Square Looks at Credit Card Transactions from a Software Perspective
• Groupon Now! and the Mobile Future
• Groupon App Helps Merchants With Groupon Redemption

Originally posted in German by Marcel Weiss, adapted for excitingcommerce.com by Jason Soo.

Comments

[www.facebook.com/profile.php?id=1317165358]

I can attest B2B. I used it to pay a supplier. He likes it because it is faster and more convenient than a paper check. It also costs less than PayPal. Currently, you can't enforce the method a payment is sent, so you can potentially pay 3% on a payment to receive. PayPal is beta testing on FreshBooks.com a business payment that can be only eCheck (ACH). They are testing it at $0.50. If Dwolla ever becomes a competitor, I think PayPal may release this beta feature widely and perhaps even lower the price. I'm not sure what value Dwolla will bring to the table when this happens. Hopefully, Dwolla can increase their value in other ways.

[Mr. Hollywood]

Souds quiete interesting as payment method - in fact we do have something quiete similar in germany with "Sofortüberweisung" - which only costs less than 1%. But i will definitly have a look on it!