8 ms·

This 28-year-old's Iowa startup moves $350 million a year.

92 points by anandkulkarni 15y ago

bartl 15y ago
This solves a problem of exuberant costs for large payments, but my main problem is the reverse: small payments, transactions of a few dollars each. $0.25 cents for a transfer of just a few dollars is way too high.
- GFischer 15y ago
  We're working on it, and so are a number of other startups (I'll have to refer you to BuySimple - https://www.buysimple.com/ https://www.buysimple.com/ - I guess, since we're not operative yet, and there are dozens of others)
- puredemo 15y ago
  That's what cash is for.
tbeseda 15y ago
My creating a dwolla account is a direct result of my interest in Bitcoin exchanges. I wonder how many of their users have a dwolla account for this purpose.?
hippich 15y ago
I have strong feeling that majority of money flow comes from Bitcoin-related services. Would be interesting to see real numbers.
- wmf 15y ago
  Dwolla lost a lot of Bitcoin business when they started doing chargebacks (the only reason Bitcoiners were using Dwolla to begin with was the claimed lack of chargebacks).
  - hippich 15y ago
    Right, but Dwolla is still an option to fund tradehill/mtgox/etc. I.e. PayPal similar problems, but is not listed as a funding option on any of these exchanges. My gut feeling says Dwolla profit a lot from bitcoin exchanges and that's a reason they allow exchanges to use their services.
xxbondsxx 15y ago
That's awesome that Dwolla is moving 350 million a year, but I wonder how many total transactions that sums up to. Since they're charging per transaction, showing a net transfer amount doesn't really give any ideas about total revenue or if they are profitable yet. It's an interesting price model for sure, but I'm surprised they just didn't do the typical "under-cut everyone else" strategy. It would be hard for me to stomach seeing $1 million transfer through my system and only 25 cents getting deposited in the company bank account. I mean that's a %0.000025 cut, and since this service is so convenient, I imagine they could charge more. Remember, things aren't priced at what they are worth but what people will pay for them. Even a 0.5% cut gives you 5k on a million dollar transaction, and that's still tons better than paypal.
- rarrrrrr 15y ago
  From the article: "The average transaction volume for Dwolla is right around $500 dollars. We move between $30 and $50 million per month." So that's 60k to 100k transactions for $15k to $25k per month in fees.
  - xxbondsxx 15y ago
    Ah thanks, I missed that. So 180k a year? That's honestly not a whole ton for a startup that big...
secretasiandan 15y ago
If they succeed, it will mean the financial transaction space is truly becoming efficient. At $.25/transaction and an average transaction size of $500, that means a charge of %0.05 or 5bps. Compare that to most credit card companies that charge 2% plus a fixed transaction fee. That also means their current run rate is $175,000/year which is not a huge business.
- suking 15y ago
  Yah - even if they get to 3.5bn it's a tiny business for taking so much risk. They need to re-think their (pricing) model.
- hop 15y ago
  If it catches on in retail - like coffee shops, restaurants, etc..., I bet that average will go far down. Sounds like the average is weighted towards with the renters/landlords they have.
Stenerson 15y ago
If the average transaction is $500 and they move $350MM a year, that's only $175,000 in revenue. I know they are still a young startup but that's certainly a less sexy number than the headline tries to imply. Am I missing something?
- Jyaif 15y ago
  Money isn't everything, I think he's more interested in changing the world: those 2% banks take for every transaction is a relic from the past that still exist because of a lack of competition, and the greed of those who dared to compete. I am really impressed by this guy.
  - omarchowdhury 15y ago
    Those 2.0% the bank take for every transaction is because they own the transaction network.
- nate_meurer 15y ago
  I think the more impressive stat is the growth in volume. Explosive it is.
thinkcomp 15y ago
Dwolla is one of many companies violating money transmitter laws. Having a bank processor as an investor does not make one exempt, nor is such an excuse consistent with the fact that Dwolla had to register as a money transmitter in Iowa. Our formal complaint to the DFI is below. https://www.facecash.com/legal/20111102.dwollapacket.pdf https://www.facecash.com/legal/20111102.dwollapacket.pdf As I've made clear in the past (http://www.aarongreenspan.com/writing/brown.html http://www.aarongreenspan.com/writing/brown.html), I'm not at all a fan of the laws, but if I have to obey them, so should everyone else.
- jacquesm 15y ago
  Aaron, I hold you in the highest regard, but this makes you look less than nice. Essentially what you have done here is rat out a competitor who may have broken a law (how do you know they have not registered?), presumably because you are in competition, not because you are concerned for the well being of your fellow citizens. If you really are not a 'fan of the laws' and you are just mad at having to obey them I think that you should stand up against those laws, rather than to rat out those that break them. It's like someone driving 55 Mph on the highway calling the police because they're overtaken by someone else doing 60, after all, if you have to obey the law so should everybody else. Technically you're in the right, but this leaves me with a weird taste, especially because you say you don't like those laws.
  - thinkcomp 15y ago
    Fair points, all. The list of registered licensees is public... http://www.dfi.ca.gov/directory/mt.asp http://www.dfi.ca.gov/directory/mt.asp ...as are lists of recent applicants (updated monthly)... http://www.dfi.ca.gov/publications/summaries/2011/september.pdf http://www.dfi.ca.gov/publications/summaries/2011/september.... http://www.dfi.ca.gov/publications/bulletins/2011/october11.pdf http://www.dfi.ca.gov/publications/bulletins/2011/october11.... The complaint against Dwolla is one of 34 I have filed with the DFI. I don't plan to file any more complaints, but I'm not done yet.
    - deleted 15y ago
Jd 15y ago
Great quote: "In my own naive way, I would never build a company anywhere but Iowa so maybe I just don't know any better. My personal feeling is, if you want to build it, where you are is just an excuse. Figure out what the area has to offer you and then leverage that. Hustle your ass off and make it work."
JamesPeterson 15y ago
Wait. What? In Australia, we have "EFT" - electronic funds transfer (between banks). Typically, there's no cost and it's accepted between all banks. If you have to transfer to another bank though, it can take one business day. We also have BPay, which is simpler and a little easier. The USA seriously doesn't have these?
- marcomonteiro 15y ago
  It does but it also requires the payee to give away personal information (e.g. routing and bank account number). It also means the payer needs to get this information before they can send money. This is essentially EFT payments but simplified. Instead of needing banking information from the payee you can just send it to them using their email address, phone number or Facebook.
  - JamesPeterson 15y ago
    Oh awesome. Thanks for clarifying :)
phaet0n 15y ago
Surely the problem at hand is not simply an atomic transaction in a distributed system, any HN reader worth her salt can do that. The problem is satisfactorily handling money laundering, fraudulent transactions, and a myriad other user-facing issues. A better question is what regulation should exist in this space, and the actual mechanics of the payment. Who gets to say the buyer's money is good, and that the seller has adequately dealt with the conditions of sale?

92 points by anandkulkarni 15y ago

bartl 15y ago

This solves a problem of exuberant costs for large payments, but my main problem is the reverse: small payments, transactions of a few dollars each. $0.25 cents for a transfer of just a few dollars is way too high.

GFischer 15y ago
We're working on it, and so are a number of other startups (I'll have to refer you to BuySimple - https://www.buysimple.com/ https://www.buysimple.com/ - I guess, since we're not operative yet, and there are dozens of others)
puredemo 15y ago
That's what cash is for.

tbeseda 15y ago

My creating a dwolla account is a direct result of my interest in Bitcoin exchanges. I wonder how many of their users have a dwolla account for this purpose.?

hippich 15y ago

I have strong feeling that majority of money flow comes from Bitcoin-related services. Would be interesting to see real numbers.

wmf 15y ago
Dwolla lost a lot of Bitcoin business when they started doing chargebacks (the only reason Bitcoiners were using Dwolla to begin with was the claimed lack of chargebacks).
- hippich 15y ago
  Right, but Dwolla is still an option to fund tradehill/mtgox/etc. I.e. PayPal similar problems, but is not listed as a funding option on any of these exchanges. My gut feeling says Dwolla profit a lot from bitcoin exchanges and that's a reason they allow exchanges to use their services.

xxbondsxx 15y ago

That's awesome that Dwolla is moving 350 million a year, but I wonder how many total transactions that sums up to. Since they're charging per transaction, showing a net transfer amount doesn't really give any ideas about total revenue or if they are profitable yet. It's an interesting price model for sure, but I'm surprised they just didn't do the typical "under-cut everyone else" strategy. It would be hard for me to stomach seeing $1 million transfer through my system and only 25 cents getting deposited in the company bank account. I mean that's a %0.000025 cut, and since this service is so convenient, I imagine they could charge more. Remember, things aren't priced at what they are worth but what people will pay for them. Even a 0.5% cut gives you 5k on a million dollar transaction, and that's still tons better than paypal.

rarrrrrr 15y ago
From the article: "The average transaction volume for Dwolla is right around $500 dollars. We move between $30 and $50 million per month." So that's 60k to 100k transactions for $15k to $25k per month in fees.
- xxbondsxx 15y ago
  Ah thanks, I missed that. So 180k a year? That's honestly not a whole ton for a startup that big...

secretasiandan 15y ago

If they succeed, it will mean the financial transaction space is truly becoming efficient. At $.25/transaction and an average transaction size of $500, that means a charge of %0.05 or 5bps. Compare that to most credit card companies that charge 2% plus a fixed transaction fee. That also means their current run rate is $175,000/year which is not a huge business.

suking 15y ago
Yah - even if they get to 3.5bn it's a tiny business for taking so much risk. They need to re-think their (pricing) model.
hop 15y ago
If it catches on in retail - like coffee shops, restaurants, etc..., I bet that average will go far down. Sounds like the average is weighted towards with the renters/landlords they have.

Stenerson 15y ago

If the average transaction is $500 and they move $350MM a year, that's only $175,000 in revenue. I know they are still a young startup but that's certainly a less sexy number than the headline tries to imply. Am I missing something?

Jyaif 15y ago
Money isn't everything, I think he's more interested in changing the world: those 2% banks take for every transaction is a relic from the past that still exist because of a lack of competition, and the greed of those who dared to compete. I am really impressed by this guy.
- omarchowdhury 15y ago
  Those 2.0% the bank take for every transaction is because they own the transaction network.
nate_meurer 15y ago
I think the more impressive stat is the growth in volume. Explosive it is.

thinkcomp 15y ago

Dwolla is one of many companies violating money transmitter laws. Having a bank processor as an investor does not make one exempt, nor is such an excuse consistent with the fact that Dwolla had to register as a money transmitter in Iowa. Our formal complaint to the DFI is below. https://www.facecash.com/legal/20111102.dwollapacket.pdf https://www.facecash.com/legal/20111102.dwollapacket.pdf As I've made clear in the past (http://www.aarongreenspan.com/writing/brown.html http://www.aarongreenspan.com/writing/brown.html), I'm not at all a fan of the laws, but if I have to obey them, so should everyone else.

jacquesm 15y ago
Aaron, I hold you in the highest regard, but this makes you look less than nice. Essentially what you have done here is rat out a competitor who may have broken a law (how do you know they have not registered?), presumably because you are in competition, not because you are concerned for the well being of your fellow citizens. If you really are not a 'fan of the laws' and you are just mad at having to obey them I think that you should stand up against those laws, rather than to rat out those that break them. It's like someone driving 55 Mph on the highway calling the police because they're overtaken by someone else doing 60, after all, if you have to obey the law so should everybody else. Technically you're in the right, but this leaves me with a weird taste, especially because you say you don't like those laws.
- thinkcomp 15y ago
  Fair points, all. The list of registered licensees is public... http://www.dfi.ca.gov/directory/mt.asp http://www.dfi.ca.gov/directory/mt.asp ...as are lists of recent applicants (updated monthly)... http://www.dfi.ca.gov/publications/summaries/2011/september.pdf http://www.dfi.ca.gov/publications/summaries/2011/september.... http://www.dfi.ca.gov/publications/bulletins/2011/october11.pdf http://www.dfi.ca.gov/publications/bulletins/2011/october11.... The complaint against Dwolla is one of 34 I have filed with the DFI. I don't plan to file any more complaints, but I'm not done yet.
  - deleted 15y ago

Jd 15y ago

Great quote: "In my own naive way, I would never build a company anywhere but Iowa so maybe I just don't know any better. My personal feeling is, if you want to build it, where you are is just an excuse. Figure out what the area has to offer you and then leverage that. Hustle your ass off and make it work."

JamesPeterson 15y ago

Wait. What? In Australia, we have "EFT" - electronic funds transfer (between banks). Typically, there's no cost and it's accepted between all banks. If you have to transfer to another bank though, it can take one business day. We also have BPay, which is simpler and a little easier. The USA seriously doesn't have these?

marcomonteiro 15y ago
It does but it also requires the payee to give away personal information (e.g. routing and bank account number). It also means the payer needs to get this information before they can send money. This is essentially EFT payments but simplified. Instead of needing banking information from the payee you can just send it to them using their email address, phone number or Facebook.
- JamesPeterson 15y ago
  Oh awesome. Thanks for clarifying :)

phaet0n 15y ago

Surely the problem at hand is not simply an atomic transaction in a distributed system, any HN reader worth her salt can do that. The problem is satisfactorily handling money laundering, fraudulent transactions, and a myriad other user-facing issues. A better question is what regulation should exist in this space, and the actual mechanics of the payment. Who gets to say the buyer's money is good, and that the seller has adequately dealt with the conditions of sale?