Wednesday, December 8, 2010
Dwolla allows cash payments to be transferred digitally between two users for a flat rate of 25 cents per transaction.
Initially available in just Iowa and California, Dwolla is going nationwide. This is because of a strategic alliance with, and a $1 million investment from, The Members Group, a payment processor serving credit unions and community banks, and the Veridian Group, a wholly owned subsidiary of Veridian Credit Union. Both companies are also based in Iowa.
According to a statement by Dwolla, these partnerships, coupled with the verification processes inherent in the platform, help provide a level of security for transactions that "exceeds typical online banking best practices."
Through The Members Group, Dwolla also gains a distribution channel that directly encompasses TMG's own 200 client financial institutions and could potentially extend to thousands of credit unions and community banks across the country.
"Right now we're focused on acquiring our first 25,000 users," said Ben Milne, co-founder and Chief Executive Officer of Dwolla. "We have expectations on how long that might take, that may shift largely with integration of FI [financial institution] clients we've been talking to through TMG. We've also noticed some uptick [in registrations] with the social media integration, which we really think is going to assist us in getting there."
Dwolla's been integrated into Facebook and Twitter and offers apps for the iPhone and Android operating systems. "We have two mobile applications currently that are live in commerce: the Android applications that can be downloaded from the Android marketplace and the Apple client-side application that can be downloaded from the Apple marketplace," said Milne. "We're also currently rolling out the iPod Touch/iPhone merchant application, which we believe will also work well on the iPad."
Jeff Russell, Executive Vice President for TMG, said TMG was particularly attracted to Dwolla's product because it can apply to P2P, small business, web store and social network transactions. "Dwolla was really the only solution we found that could address all four markets and had integration with all four prior to our partnership."
Nick Evens, President of the Veridian Group, said Dwolla's system fit his company's desire to be in on "the next generation of movement of money." He pointed out, "The P2P marketplace is exploding quickly, and the adaptation of mobile is also something that is changing rapidly. We thought it important to be on the leading edge of that."
Evens believes the Dwolla payment system will be particularly attractive to younger consumers. "The adaptation seems to be rapid in the 18 to 34 demographic, and that's a demographic all credit unions strive to appeal to," he said.
Russell said other early adopters may include businesses currently accepting only cash and checks, nonprofits and small web merchants. "I think what you'll see is that there will be some midsize web merchants who see the value of this right away," Russell said. "It's a very open technology from an API [application programming interface] perspective, so they can integrate it into their shopping cart easily."
Adoption by brick-and-mortar merchants could move more slowly. "We'll roll out the physical merchants' applications relatively slowly," Russell said. "Obviously, that's always the big issue with the payments platform – the infrastructure component. We'll continue to test that, too."
Russell feels that Dwolla could have a place in ISOs' array of product offerings. "I think it really could be a complementary aspect to what they provide today to merchants, particularly if they are able to offer, over time, a single POS device that takes all types of payment mechanisms," he said.
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