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This 28-Year-Old Is Making Sure Credit Cards Won't Exist In The Next Few Years

427 points by olegious 15y ago

igrekel 15y ago
I don't know about in the US but I regularly transfer money througgh email with an ING Direct canadian account. I know other financial institutions here have similar functionality.
ck2 15y ago
So why do ACH transfers take 4-5 days in 2011 anyway?
- wiredfool 15y ago
  Short answer, They don't. Longer answer, they're usually overnight, the transaction goes out one day and funds are available the next (to the bank anyway). In some cases, there's same day stuff if you hit the early window, but that takes a cooperative bank. Retail wise, they can take up to 2 business days if you try to do it at a small bank with a correspondent relationship to a real bank in alaska. But when you see 4 or 5 days, it's because the bank is holding access to the funds because the transaction is reversible. 3 days is the window for things like NSF and incorrect account numbers, but in the case of unauthorized stuff, it's 90 days. Frauds can claw back even farther.
rcraft 15y ago
Anyone out there paying their rent with a credit card while maintaining no fees for the landlord? I played around with Venmo in the past and thought this would be perfect for this use case. Been a while, but I believe you can accept credit cards directly and pay no fees. Seems crazy, but I think the only downside is the amount limits. Would be awesome to collect cc rewards on rent payments every month.
- luser001 15y ago
  I do. :) Corporate-owned apt complex.
  - rcraft 15y ago
    Thats awesome. Is this common practice for corporate-owned complexes? And they obviously don't charge you anything extra to use a card? I've always rented from individuals, so don't have experience.
    - luser001 15y ago
      wrt common practice: I don't think so. They added this feature quite recently (a year or so ago).
  - smokinn 15y ago
    Same here. Getting 1% back on rent is pretty cool.
thinkcomp 15y ago
This article was posted a few days ago. I'm a competitor. Having built the same kind of company from the ground up, I have good reason to suspect that most of Dwolla's transaction volume does not come from mobile payments, if the $350 million / year number is accurate in the first place. Some revenue comes from Bitcoin transactions, which the article doesn't mention, creating the false impression that Dwolla is already a mobile payments juggernaut. It isn't. Dwolla does not integrate with any point of sale systems to the best of my knowledge, which means that the title of this article is basically fantasy. Dwolla is also breaking California law by operating in a manner that allows California users to use the service without a money transmission license. (Having an investor that processes transactions for banks does not make Dwolla exempt. Anyone who doubts this should read the list of exemptions: http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&group=01001-02000&file=1805-1806 http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&#3.... If Dwolla were considered a bank it wouldn't need a money transmission license in Iowa, which it has.) I'm not a fan of that law, so as of yesterday I've sued the State of California over it. https://www.facecash.com/legal/brown.html https://www.facecash.com/legal/brown.html
- viggity 15y ago
  I'm from Des Moines and know a couple of people that work at Dwolla. I haven't heard anything about Dwolla doing a lot (if any) bitcoin transactions. Do you have a source on that? Dwolla has an API so any point of sale system can integrate with it if they so choose, but I believe that most retail locations that accept Dwolla either check the dwolla website, iphone or androids apps for incoming payments.
  - thinkcomp 15y ago
    Here are some Bitcoin/Dwolla links: https://en.bitcoin.it/wiki/Dwolla https://en.bitcoin.it/wiki/Dwolla https://en.bitcoin.it/wiki/MtGox#Dwolla https://en.bitcoin.it/wiki/MtGox#Dwolla http://www.siliconprairienews.com/2011/07/as-bitcoin-exchanges-drop-dwolla-milne-says-company-stays-focused http://www.siliconprairienews.com/2011/07/as-bitcoin-exchang... I'm not aware of any POS companies that have actually implemented the Dwolla API, but I could be wrong.
wmf 15y ago
Previous discussion: http://news.ycombinator.com/item?id=3228816 http://news.ycombinator.com/item?id=3228816
stereo 15y ago
Looks like he just reinvented the wire transfer. In Europe, a lot of money is transferred like this; I can even make transfers from my phone.
- dpark 15y ago
  I don't know about you, but I'm not generally keen on giving my account number to someone so they can wire me a few bucks. That's rather error prone and a little shaky on the security side. It can also be rather expensive, depending where you're sending to/from.
  - pge 15y ago
    I think most of the applications (like the ING example) have the recipient supply that information to the sender's bank, not to the sender himself. Not totally sure it works that way in Europe, but I think so.
    - dpark 15y ago
      That doesn't address the error-prone nature. I don't know off the top of my head my account number or routing info. Looking it up is a pain and typing it in can be done incorrectly. This isn't something I want to do regularly. I'm also not clear how the recipient supplies their info to the sender's bank. If I don't have an ING account, how can they verify that I'm me, and not someone else who's pretending to be me in order to intercept the transfer? As I recall, when I've done wire transfers, I've always been given the account info of the recipient for me to provide to my bank (but I haven't done this very frequently). Edit: I just saw your other reply where you describe the ING app. I guess that works, but it's rather unfriendly. I'm always a little wary of high-security stuff (such as money transfers) that depend on email, too, but that's also an issue for Dwolla and probably a lot of the other payment startups.
      - TillE 15y ago
        > I don't know off the top of my head my account number or routing info. Looking it up is a pain and typing it in can be done incorrectly. This isn't something I want to do regularly. But how is that any different from a credit card number? I have all my bank info in my pocket, right on my Maestro card. No expiration date, no CVV code. Just an account number and a publicly-known bank number. If I'm authorizing a direct debit, that's all I have to enter.
Aloisius 15y ago
Credit cards exist because people need a line of credit and debit cards seem to offer the same benefits as Dwolla, at a lower interchange rate for the merchant. The P2P feature is nice, ACH generally isn't used directly by individuals and wire transfers/EFTs can be quite expensive. I wish someone would make a real alternative credit processing network, but there are so may laws and regulations, I wonder if it is even possible to ever have something like a simple 1% transaction charge.
- davej 15y ago
  Credit cards exist because it used to be very difficult to check the balance of an account in realtime during transactions. This is no longer an issue. It's true that some people need to purchase items on credit but the reason that they're so popular now is less to do with having a line of credit and more to do with the legacy of the technology.
  - smiler 15y ago
    The primary reason _is_ for people to spend money they don't have. Secondary reason is that CC offer easier charge back, customer protection etc.
    - davej 15y ago
      That may be true now. I was specifying the reason that they came into existence in the first place (as opposed to debit cards), not why people use them now. My opinion is that the reason credit cards remain so popular now is because of Visa's policy that forbids merchants from charging a different price for credit card transactions. As a consumer, when you pay by cash or debit then you are effectively subsidizing purchases by credit card. Credit cards wouldn't be so popular if the consumer was made to bear the true cost of their chosen transaction method. I think many would prefer to use a debit card and be reimbursed the difference for the transaction fee (vs. credit card) but Visa's policies don't allow this and unfortunately it's not viable for most businesses to simply stop accepting credit cards. Edit: I was wrong, while retailers can't add a surcharge for credit cards, they can offer a discount for cash/debit/cheque transactions: http://usa.visa.com/personal/using_visa/checkout_fees/index.html http://usa.visa.com/personal/using_visa/checkout_fees/index....
powertower 15y ago
At 40MM/month, with average transaction of $500, and a $0.25 fee for each transaction, they make $20,000 per month revenue... After you pay employees (12 people), other costs (including legal), and take a hit from fraud, I can't imagine there is a great upside to this business unless they start doing at least 100x more volume. Concidering the nature of the business, I don't see this happening.
- derwiki 15y ago
  You could have said the same thing about Craigslist. Sometimes it's more important to be disruptive.
  - powertower 15y ago
    Consumers arn't getting rid of their credit cards any time soon. Why would they? They get 1) credit, 2) get to dispute anything they want off the bill, 3) don't pay any type of fee. And the merchants don't drive payment options ... they simply accept what consumers provide. Also, IMO, the moment fraudsters target Dwolla, is the moment Dwolla realizes that a 2-7% transaction fee is necessary to stay in business.
    - dethink 15y ago
      Consumers pay the fees. Just not directly.
      - icebraining 15y ago
        Costumers don't pay fees for having a CC. They pay fees because CCs exist, regardless of whether they have one or not. Which means using Dwolla or a CC is irrelevant in that regard.
        breck 15y ago
        Many PoS merchants also now charge surcharges for using cards. (which I admit for a merchant only makes financial sense if you underreport cash on your taxes--otherwise it seems the costs of handling cash coupled with lack of reporting is drastically more than the interchange).
mcv 15y ago
I love these kind of projects. We desperately need independence from the Visa/Mastercard monopoly over international transactions.
- suivix 15y ago
  Except that dealing with the Dwolla people is far worse than Visa/Mastercard.
  - dethink 15y ago
    Can't be worse than PayPal. Depositing 2k, then spending none of it and withdrawing it 2 months later might be odd. Either way, sending a photocopy of your ID is not unreasonable.
    - suivix 15y ago
      It's very unreasonable since they deposited the money and had zero transactions. Dwolla got the money from their bank account, and my parents wanted to send it back to the same account. It's even more unreasonable since they gave no notice that there was a hold on the withdrawal.
  - mst 15y ago
    So far all I know is that in your opinion, in one specific instance Dwolla behaved in a manner that you believe was worse than how Visa/Mastercard would have behaved. Every company has the occasional unsatisfied customer.
- kahawe 15y ago
  Let's just start with lynching paypal first before we move on to those two that are actually offering a usable solution.
suivix 15y ago
My parents put $2000 in a Dwolla account, did nothing with it, and two months later decided to withdraw it. Dwolla put a hold on it for over a week without any notification, and my father finally decided to call. On the phone they said 'well you know, $2000 is a lot of money'. My parents had to send over scanned photo identification just to get their money out. Anyways, what I learned is that Dwolla's customer service is terrible. I don't recommend it to anybody.
- antidaily 15y ago
  Sounds like Neteller or something. Remember them?
  - nixarn 15y ago
    I had to use them at one point. Never again!
- davidandgoliath 15y ago
  So because Dwolla's customer service tried to protect your parents, they're horrible? Just curious. I used to think my bank was evil because they'd process every check manually adding delays -- but it's saved me in a few fraud cases. (They're still evil for many other reasons though)
  - breck 15y ago
    > So because Dwolla's customer service tried to protect your parents, they're horrible? This is a common marketing lie. This actually isn't trying to protect his parents. This is greatly inconveniencing his parents in order to protect themselves in a cheaper fashion. Preventing theft is hard. Preventing theft while not punishing users is extremely hard. And so lots of banks and services take the easy route: forcing complicated passwords, OTP's, holds, "sitekeys", security questions, et cetera. True protection would be: "Behind the scenes we are going to do everything we can stop thieves. And, in the very rare cases where they succeed and access your account, we'll cover it 100%. And, we're not going to make you stab yourself in the eye every time you want to create an account, or send, receive or withdraw funds." Then it's up to Dwolla to build in strong defensive and offensive measures to combat online thieves, without making 99.9% of its users suffer for the 00.1% of people that are looking to steal. tldr; these "security measures" absolutely suck and I can't wait for the service that comes along and says "we did the hard security work so you don't have to". P.S. Dwolla looks awesome. I signed up. Am very impressed. I realize EVERYONE has these PitA security measures and I'm sure the Dwolla guys hate them just as much as me and have plans to eliminate them eventually. I just had to respond to the marketing bs.
vsl2 15y ago
I wish him well on his endeavor because I'm not a fan of CC fees, but from a consumer standpoint, I don't see any benefits. CCs provide (i) a line of credit, (ii) fraud protection, and (iii) rewards/bonuses. All of these can be incredibly valuable, particularly (ii) - you never appreciate the no-liability fraud protection of a CC until you discover how difficult it is to deal with situations in which your bank account is affected. If credit cards were not already the dominant electronic payment mechanism (i.e. VISA/MC were just starting like Dwolla is), Dwolla could possibly win out because businesses could refuse CC's. Not going to happen now, at least with regards to business-to-consumers. And I don't think most B2B transactions were conducted through CC's anyways. They seem to be doing okay now, but I don't see any secret sauce that's going to make them anything more than a fringe player in the payments industry.
- yalogin 15y ago
  Yes. The fraud protection and line of credit are valuable to people but why is that linked to the processing fee and network? Those features are provided by the bank which only provide them irrespective of the network your purchases are processed on. That is the key. The main advantage with a card is you can pay with it anywhere in the world. That kind of scale takes a lot of time to achieve and that is the reason the whole ecosystem is milking users.
- nickik 15y ago
  Isn't it really easy to steel somebodys card? Isn't credit card theft a big problem in amerika? Dept cards are protected with a code so there not that easy to steal. Im from europe and this is just how it is in my view of the Amerika but I draw my knowlage from movies and stuff so correct me.
  - jedbrown 15y ago
    It's easy to steal a card, but the card companies do pretty good fraud analysis and in any case, the card owner is never responsible for the fraudulent charges. Of course the cost of the fraud monitoring and insurance system are passed on to merchants and those who carry a balance. But if you don't carry a balance, there is no question that a rewards card is the best available payment mechanism. If you use something else, you are subsidizing those who use rewards cards.
kayoone 15y ago
In Germany (and most of europe) credit cards arent used very much. I can wire transfer money inside the country for free, i can pay in alot of Online Shops by direct debit who get the money directly from my bank account. In stores i use a card associated with my bank account (not a credit card) to pay which also lets the merchant get the money directly from my bank account. I am suprised that the US doesnt have a similar system, no wonder everyone uses credit cards there. Thats also why i think Square wouldnt be very successfull over here.
- ebzlo 15y ago
  We can use debit cards here as well, the reason we generally don't are usually because of the security and benefits (mileage) you get from using a credit card.
  - pedrolll 15y ago
    We don't have to use any kind of cards in Finland, and I think the situation is the same in Germany. I can directly pay a merchant and the money is transferred from my bank account without having a card at all. I can use a credit card as well, or a debit card, but there really is no point to use them here. It's surprising how far behind the U.S. is in this matter.
    - jrockway 15y ago
      Why do you say "far behind"? I can go into pretty much any store in the world and bust out a piece of plastic to pay for the purchase. And I get frequent flyer miles.
      - vidarh 15y ago
        Presumably because this article presents Dwolla as something new and fantastic, when it's something that's available in most European countries in one form or another right now. (and of course the experience from Europe is that while it competes with debit and credit cards, it kills neither)
bryze 15y ago
It really surprises me how many nay-sayers have posted negative comments, here. Bottom line is that, because of the popularity of paying with credit cards, merchants have to pass on the cost of transaction fees to consumers. Consumers pay. Will your reward points make up for the increased prices that you unwittingly pay? I doubt it. Even if Dwolla isn't the one to do it, toppling credit card profits is in everyone else's interest.
- smackfu 15y ago
  Why are merchant credit card fees somehow different from all the other costs that merchants silently pass on to the consumers? Costs that the merchants choose to pay in order to get more sales?
  - nickik 15y ago
    The are diffrent because the can be avoided easly. Visa/Mastercard are not really doing much but the suck lots of cash out of the real economy and you think thats fine because other people/things suck out money too. We should the consomer keep paying for this when it can be avoided. If there are other silent cost you too should do a start up to help avoid those.
- kahawe 15y ago
  I don't see giving direct bank account access to any third party plus from my own customer point of view, both VISA and Mastercard have worked well for me in pretty much all situations in a lot of different countries all over the world. If it can bring down the credit card transactions costs then great but other than that, I see no reason to move to bitcoins or dwolla because I see not a single benefit for me. Maybe it is great for you USA hackers but here in Europe... shrug.
pitdesi 15y ago
This is interesting. I really like Dwolla as a company and the ambition, and think the are executing well, but there are some things you should know. 1) Most Americans use credit cards because they need the credit. That is something that won't be solved. Many of us also like the benefit of rewards (miles, dollars, whatever). To get payers on board, you need credit, rewards, and exclusivity (i.e. is this the only payment method available at somewhere where I want to shop). The last 2 meaningful companies were paypal and discover card. PayPal had millions of Ebay sellers using PayPal AND they initially paid people to become members. Discover card started the cashback movement and was the only electronic payment option at Sears (largest retailer in the world at the time). 2) Due to the Durbin amendment (which went into effect October 1st of this year), debit card cost to a FeeFighters merchant for the average transaction in the US is about $0.25. (http://feefighters.com/durbin http://feefighters.com/durbin). They now cost 22 cents plus 0.05% of the transaction. The reason that I mentioned a FeeFighters merchant is that most processors do NOT pass through the savings to the customer, you only get that with interchange-plus billing (which only about 10% of merchants are on, mostly big merchants). 3) Doing some quick math, that $350 million in transaction volume gets them to $175,000 in revenue per year ($350M/$500 transaction size)*$0.25 = $175,000. Still, they have a fantastic opportunity and I for one am rooting for them. Ben has the same roots as FeeFighters (had another company, was pissed off at how much he was paying in processing fees). He chose to tackle it a different way, one that is probably harder to execute on but can make more change in the long-run. Having met him, I bet that he didn't quite say the words in that headline.
- cynicalkane 15y ago
  Credit cards right now are used by a lot of people because they're the best payment option. Easy to use, limited risk of loss to theft, many offer cash back or airline miles. They can also be used as a source of payday/personal loans, but that strikes me as suboptimal. Justifying the existence of credit cards as a source of credit doesn't make sense. One, why must the credit be tied to a card? Two, how often is a responsible spender gonna need that card as a lender of last resort? In fact, the idea of a "charge card" predates the idea of attaching a revolving line of credit to one, and you can still get charge cards from American Express, among other firms. The only argument in favor of credit cards is the freedom-oriented one that people should be free to have easy access to run up revolving debts. I'm fine with this argument, but let's not obscure the issue by pretending that a significant number of people actually need access to that credit and that they need it in card form. The utility of credit cards lies in making payments, not having credit, and they're clearly an inferior solution--the space is ripe for disruption.
rcraft 15y ago
I'm using Chase QuickPay to pay my rent. No fees for either of us and it works great, I don't even have a Chase bank account, but quickly set up an account and linked it to my BofA account. Only problem is I believe the daily limit for payments is $2,000. From this example, clearly some banks are figuring out how to sidestep the credit card companies and provide value. How would this and other similar products like the ING product not be serious threats to Dwolla?
- mahyarm 15y ago
  Issuing banks (the bank name on your credit card) get the majority of the credit card fee revenue, visa/mastercard and the requesting merchant bank get considerably less.
  - rcraft 15y ago
    Chase QuickPay has nothing to do with credit cards. I'm under the impression its all ACH transfers linking my checking account (at bofa) to my landlords (at chase).
feralchimp 15y ago
The 28-year-old in the story is a sympathetic protagonist, and gives the venture plenty of indie cred, but let's all take a moment to reflect on the fact that he's only being allowed to do this because one of his primaries is an entrenched inside player. He managed to pitch someone one layer deeper inside the onion of oligarchy, and those folks decided the glass slipper fit. Anyway, well played, sir.
- kfcm 15y ago
  Agree. After all, he did have another, non-tech $1MM/year business. Suppose his banker was just going to blow him off when he approached with this idea? Personally, I think this is Wells Fargo (and maybe a couple others) outsourcing the development of a new payment system/network.
Ezku 15y ago
Link to TFA on one page without the fluff: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/11/10/businessinsiderthis-28-year-old-is-.DTL&type=printable http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/11/10/...
underwater 15y ago
I'd never written a cheque until I moved to the US; I was pretty shocked at how backwards money transfer is here. In Australia, BPAY (http://en.wikipedia.org/wiki/BPAY http://en.wikipedia.org/wiki/BPAY) is pretty much how all utilities and services are paid for. Transactions between individuals are usually via standard wire transfer and are free, and often instant.
miles_matthias 15y ago
I got the opportunity to listen to Ben speak at Startup Weekend Des Moines and I have to say I'm really impressed with him. Regardless of Dwolla's future (personally I think they will transform the industry), Ben is a shining example of working hard and being a successful entrepreneur in a place that really isn't very supportive of people who think differently. There are now a few legitimate VCs, college courses, and frequent startup events in the Des Moines area and every single person I've talked to gives a lot of credit to Ben for helping that grow. Des Moines even just recently launched one of their first incubator programs (Startup City) and is seen as a legit player in the Silicon Prairie. My team at Startup Weekend Des Moines (Fundle.co) revolved does group payment systems and Ben brought his team from Dwolla to meet us and offer their expertise for coding the backend payment processing part of it. Even if they don't kill the credit card, Dwolla deserves a lot of respect for helping to jump start the entrepreneur community there.
kin 15y ago
As a customer, I prefer: http://venmo.com http://venmo.com Lets me easily pay my friends and vice versa, 100% free, no transaction charges. Funds get pulled out of my credit card like a regular purchase (OR out of debit card or checking if preferred) Funds paid to me get automatically deposited into my checking account. Usage is effortless. They make money by charging a percentage on transactions that businesses receive.
rmc 15y ago
Where we've seen a ton of transactions right now is with people paying monthly rent. I don't understand this. Perhaps it's an American thing, but here in EU, I just put my landlord's account numbers into my online banking and I can transfer them money for essentially free. I even set up a standing order so it'll pay the same amount at a fixed day per month. I don't have to worry about paying rent. How does a landlord accept money via their credit card?
- Lexarius 15y ago
  For reasons unknown to me, the local property oligopoly accepts debit/credit rent payments only through an outsourced web service which charges $50 per payment. Perhaps they've convinced the property owners that they have a patent on paying rent online or something. Maybe there's some sort of risk involved. Maybe there's some sort of arrangement with credit card companies to discourage people from earning reward points on their rent every month. My bank's website doesn't list the company as one that it knows how to pay bills for, and wants you to send them a copy of the physical bill to get it added (there are no "bills" for the rent, so nothing to send). A direct transfer might be possible, but they don't seem to be advertising their account number.
  - bdonlan 15y ago
    Every bank I've ever tried bill pay on (ING, Bank of America, E*Trade bank, Citizens Bank, Kennebunk Savings Bank) offers an option where you simply enter the account number and bill address, and they cut a check for it. No hassle. Maybe try some other bank, then?
- itsnotvalid 15y ago
  If somehow I can check exactly who send me the money it would be great, however times are, banks don't always show you who is sending you money in the statements (at least happen to me with my non-EU non-US bank). If one uses such service, the statement would have clear indication of who makes the transaction and would be much more traceable.
  - 15y ago
tlrobinson 15y ago
I did a double take when reading this line... "The only fee would be if someone paid you. We take a quarter. We really want that quarter. It's all we want!" He should probably say "25 cents" instead of "a quarter".
- jerfelix 15y ago
  25 cents. 25 percent. whatever. we really want that quarter. That's pretty funny.
EREFUNDO 15y ago
Maybe the current downturn (bankruptcy filings, closing of CC accounts)is forcing people to start using cash instead of credit. I am a cash person myself, but asking people direct access to their bank accounts would be a hard sell, at least with credit cards there are many situations where they would allow chargebacks. They will have a niche market of cash based merchants, that is for certain. But it is way too early to say that their system can make credit cards obsolete within the next few years. Credit cards are just becoming popular in emerging markets where eCommerce is relatively nascent. The real issue now is securing cross border and long distance payments, being able to provide an unprecedented level of security demanded by the globalizing peer-to-peer and business-to-business transactions.
kahawe 15y ago
While it sounds great that someone is taking a stab at making transferring money easier and cheaper, they are clearly missing a few crucial points. First, they are complaining credit card companies charge them for their service - on the other hand, those companies do have costs for building and maintaining their systems and all costs that come with it. We will leave the question whether their prices are reasonable or fair aside for now. Another benefit I get from CC transactions: when I send money to the wrong person or got scammed, I can just have VISA cancel it and I get my money back. In the good 10 years I have been using my own CC(s) I needed to do that maybe 2 or 3 times and it worked absolutely flawlessly. You cannot just cancel a bank transaction and get your money back like that. Also, wiring money abroad is going to be a much bigger problem for them. But there is a far more fundamental flaw in their logic: > "We think, in the long term, sending money should be as easy and effortless as finding a friend on Facebook." The reason anything money-related is so over-regulated and cumbersome and full of regulations and bureaucracy is not just "the man keepin' ya down, bro" and neither is it only stupid people who only try to come up with empty regulations to bill you. All that is in place to fight against money laundry and help make it more difficult for worldwide organized crime to make easy use of their illegal cash. The very reason you can not just send money as easily and effortlessly as friending someone on facebook is: if you could, your first customers would be organized crime. They cannot wait for new possibilities to launder money easier and faster. I am wondering how they can be moving 50 million a week without all sorts of agencies cracking down on them? This has got to be heaven for small and big time drug (or weapons, humans) sellers as of now. So ultimately, it makes me sad this doesn't look like a promising replacement for the paypal overlords.
lhnn 15y ago
>Can users only send money to Dwolla members? No, 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.... LOLWUT In other words, you must have an account to receive money. Technically different, but that is some lawyerspeak if I've ever heard it.
nl 15y ago
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 "been surprised at the conversion" when someone is sending you money?! I think that's pretty much the ultimate dream - one customer paying another person to sign up!
eduardordm 15y ago
Well, dwolla is a credit card company. I'm a CTO (and co-owner) of a medium-sized credit firm in Brazil (full stack: processing, credit, gateway, etc). We offer plastic cards, iOS & android apps, NFC, IVR calls, web app, e-CPF (Brazilian electronic "social security" card) as form of payment methods. Guess what? Most people WANT the damn card. We would LOVE not to spend 1.4 U$ on every card we have to manufacture. I don't see Dwolla as the future of payments, they offer a limited solution. My company is planning for a future where there will be many ways to make a payment, fit for every social class and/or preference. In brazil, it takes 3 minimum payments to buy a smartphone. In the US, 49 million citizens are poor. Let's not deny the economic reality we are living in right now.
jaggederest 15y ago
I just want to find his PR agent/agency. I've seen this story in 8 different outlets and forums over the last little while.
ricardobeat 15y ago
There's a lot of talk here on how credit cards trump every other form of payment, on credit lines and rewards. Americans love their cards: * 1.4 billion credit cards held by U.S. consumers * Average credit card debt per household with credit card debt: $15,799 * Total U.S. consumer debt: 800 billion (down from ~1 trillion in 2008) Yeap, look at that debt, credit cards are amazing. Let me put my f___ the system hat: 1. $2 trillion in transactions per year. 2. Merchants pay between 2-4% in fees for every transaction Many people seem to forget about the second - "I'm not paying any fees" :/. That means around $40 billion in fees per year. A few billion short of the national budget for the US Department of Education. I really, really doubt it's costing all this money to send and track (mostly virtual) money around. And we haven't taken into account the late fees (around $20b/year), overcharge fees, annual fees, banking fees and others. Credit cards are just money harvesting machines. Why exactly do we need a third-party to handle our payments? Banks own our data and most of the infrastructure. Electronic payments should be part of the basic account package. "Reward" cards are just another marketing gimmick to get you to use more cards. /hat off Cutting myself short, I'm extremely excited with what Dwolla/Square and others are doing. It's 2011, I want to make payments with my eyes!
yason 15y ago
In Finland, account-to-account wire transfers are practically free and there are two internet buying options in general use that rely on them alone. First, most internet shops can do what the mail order companies have done for decades: they send you the product along with a bill that you can pay with a wire transfer. These days it means you go to you internet banking site and issue the transfer directly from your account to the merchant's account. Second, a majority of big merchants provide "internet banking payment" where the merchant's site is linked with the top ten major banks' internet services. From the merchant's site you choose your own bank and they will redirect you to the online banking services of that bank, along with the amount they want to charge and some other metadata. Now, your bank will ask you to login to your own internet banking account and use it to authorize a wire transfer for the given amount. After that's done (securely, on the bank's own website), the bank will redirect you back to the merchant's site, again with a token that the merchant's software can use to verify that the transaction went through. Also debit cards are in high use: they are usually free to obtain as well and it costs a merchant much less to charge a debit card than a credit card. This is sort of related because debit card transactions are practically just wire transfers. Some of them, such as Visa Electron, will actually require an online connection to your bank so that the balance can be checked prior to the wire transfer. It all comes down to the fact that Finland's banks have been historically well interconnected and they also have a long history of electronic inter-bank transactions. Wire transfers have been a commonly supported and cheap way to transfer money since the 80's: also private individuals can use them to move money to each other free of charge. Further, wire transfers are immediate between accounts in the same bank; between two different banks it takes one night to get them cleared.
latch 15y ago
"Our generation actually understands that when you buy sh*t, it comes out of your bank account and you have to pay for that." Money quote. Makes me want to work there. This is our generations equivalent of Jobs' universe quote.
davidcollantes 15y ago
When I use my credit card to pay what I normally have to pay for each month (groceries, utilities, etc) I get money back (yes, a check in the mail). Dwolla can't beat that. When I buy electronics with my credit card, I get an extra year of warranty, and buying protection. Dwolla can't beat that. When I travel, or rent a car, I get insurance coverage with my credit card. Dwolla can't beat that. When I buy anything with my credit card, and something goes wrong, I lose no money. None at all. Dwolla can't beat that. Long live, Credit Cards!

427 points by olegious 15y ago

I don't know about in the US but I regularly transfer money througgh email with an ING Direct canadian account. I know other financial institutions here have similar functionality.

ck2 15y ago

So why do ACH transfers take 4-5 days in 2011 anyway?

wiredfool 15y ago
Short answer, They don't. Longer answer, they're usually overnight, the transaction goes out one day and funds are available the next (to the bank anyway). In some cases, there's same day stuff if you hit the early window, but that takes a cooperative bank. Retail wise, they can take up to 2 business days if you try to do it at a small bank with a correspondent relationship to a real bank in alaska. But when you see 4 or 5 days, it's because the bank is holding access to the funds because the transaction is reversible. 3 days is the window for things like NSF and incorrect account numbers, but in the case of unauthorized stuff, it's 90 days. Frauds can claw back even farther.

rcraft 15y ago

Anyone out there paying their rent with a credit card while maintaining no fees for the landlord? I played around with Venmo in the past and thought this would be perfect for this use case. Been a while, but I believe you can accept credit cards directly and pay no fees. Seems crazy, but I think the only downside is the amount limits. Would be awesome to collect cc rewards on rent payments every month.

luser001 15y ago
I do. :) Corporate-owned apt complex.
- rcraft 15y ago
  Thats awesome. Is this common practice for corporate-owned complexes? And they obviously don't charge you anything extra to use a card? I've always rented from individuals, so don't have experience.
  - luser001 15y ago
    wrt common practice: I don't think so. They added this feature quite recently (a year or so ago).
- smokinn 15y ago
  Same here. Getting 1% back on rent is pretty cool.

thinkcomp 15y ago

This article was posted a few days ago. I'm a competitor. Having built the same kind of company from the ground up, I have good reason to suspect that most of Dwolla's transaction volume does not come from mobile payments, if the $350 million / year number is accurate in the first place. Some revenue comes from Bitcoin transactions, which the article doesn't mention, creating the false impression that Dwolla is already a mobile payments juggernaut. It isn't. Dwolla does not integrate with any point of sale systems to the best of my knowledge, which means that the title of this article is basically fantasy. Dwolla is also breaking California law by operating in a manner that allows California users to use the service without a money transmission license. (Having an investor that processes transactions for banks does not make Dwolla exempt. Anyone who doubts this should read the list of exemptions: http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&group=01001-02000&file=1805-1806 http://www.leginfo.ca.gov/cgi-bin/displaycode?section=fin&#3.... If Dwolla were considered a bank it wouldn't need a money transmission license in Iowa, which it has.) I'm not a fan of that law, so as of yesterday I've sued the State of California over it. https://www.facecash.com/legal/brown.html https://www.facecash.com/legal/brown.html

viggity 15y ago
I'm from Des Moines and know a couple of people that work at Dwolla. I haven't heard anything about Dwolla doing a lot (if any) bitcoin transactions. Do you have a source on that? Dwolla has an API so any point of sale system can integrate with it if they so choose, but I believe that most retail locations that accept Dwolla either check the dwolla website, iphone or androids apps for incoming payments.
- thinkcomp 15y ago
  Here are some Bitcoin/Dwolla links: https://en.bitcoin.it/wiki/Dwolla https://en.bitcoin.it/wiki/Dwolla https://en.bitcoin.it/wiki/MtGox#Dwolla https://en.bitcoin.it/wiki/MtGox#Dwolla http://www.siliconprairienews.com/2011/07/as-bitcoin-exchanges-drop-dwolla-milne-says-company-stays-focused http://www.siliconprairienews.com/2011/07/as-bitcoin-exchang... I'm not aware of any POS companies that have actually implemented the Dwolla API, but I could be wrong.

wmf 15y ago

Previous discussion: http://news.ycombinator.com/item?id=3228816 http://news.ycombinator.com/item?id=3228816

stereo 15y ago

Looks like he just reinvented the wire transfer. In Europe, a lot of money is transferred like this; I can even make transfers from my phone.

dpark 15y ago
I don't know about you, but I'm not generally keen on giving my account number to someone so they can wire me a few bucks. That's rather error prone and a little shaky on the security side. It can also be rather expensive, depending where you're sending to/from.
- pge 15y ago
  I think most of the applications (like the ING example) have the recipient supply that information to the sender's bank, not to the sender himself. Not totally sure it works that way in Europe, but I think so.
  - dpark 15y ago
    That doesn't address the error-prone nature. I don't know off the top of my head my account number or routing info. Looking it up is a pain and typing it in can be done incorrectly. This isn't something I want to do regularly. I'm also not clear how the recipient supplies their info to the sender's bank. If I don't have an ING account, how can they verify that I'm me, and not someone else who's pretending to be me in order to intercept the transfer? As I recall, when I've done wire transfers, I've always been given the account info of the recipient for me to provide to my bank (but I haven't done this very frequently). Edit: I just saw your other reply where you describe the ING app. I guess that works, but it's rather unfriendly. I'm always a little wary of high-security stuff (such as money transfers) that depend on email, too, but that's also an issue for Dwolla and probably a lot of the other payment startups.
    - TillE 15y ago
      > I don't know off the top of my head my account number or routing info. Looking it up is a pain and typing it in can be done incorrectly. This isn't something I want to do regularly. But how is that any different from a credit card number? I have all my bank info in my pocket, right on my Maestro card. No expiration date, no CVV code. Just an account number and a publicly-known bank number. If I'm authorizing a direct debit, that's all I have to enter.

Aloisius 15y ago

Credit cards exist because people need a line of credit and debit cards seem to offer the same benefits as Dwolla, at a lower interchange rate for the merchant. The P2P feature is nice, ACH generally isn't used directly by individuals and wire transfers/EFTs can be quite expensive. I wish someone would make a real alternative credit processing network, but there are so may laws and regulations, I wonder if it is even possible to ever have something like a simple 1% transaction charge.

davej 15y ago
Credit cards exist because it used to be very difficult to check the balance of an account in realtime during transactions. This is no longer an issue. It's true that some people need to purchase items on credit but the reason that they're so popular now is less to do with having a line of credit and more to do with the legacy of the technology.
- smiler 15y ago
  The primary reason _is_ for people to spend money they don't have. Secondary reason is that CC offer easier charge back, customer protection etc.
  - davej 15y ago
    That may be true now. I was specifying the reason that they came into existence in the first place (as opposed to debit cards), not why people use them now. My opinion is that the reason credit cards remain so popular now is because of Visa's policy that forbids merchants from charging a different price for credit card transactions. As a consumer, when you pay by cash or debit then you are effectively subsidizing purchases by credit card. Credit cards wouldn't be so popular if the consumer was made to bear the true cost of their chosen transaction method. I think many would prefer to use a debit card and be reimbursed the difference for the transaction fee (vs. credit card) but Visa's policies don't allow this and unfortunately it's not viable for most businesses to simply stop accepting credit cards. Edit: I was wrong, while retailers can't add a surcharge for credit cards, they can offer a discount for cash/debit/cheque transactions: http://usa.visa.com/personal/using_visa/checkout_fees/index.html http://usa.visa.com/personal/using_visa/checkout_fees/index....

powertower 15y ago

At 40MM/month, with average transaction of $500, and a $0.25 fee for each transaction, they make $20,000 per month revenue... After you pay employees (12 people), other costs (including legal), and take a hit from fraud, I can't imagine there is a great upside to this business unless they start doing at least 100x more volume. Concidering the nature of the business, I don't see this happening.

derwiki 15y ago
You could have said the same thing about Craigslist. Sometimes it's more important to be disruptive.
- powertower 15y ago
  Consumers arn't getting rid of their credit cards any time soon. Why would they? They get 1) credit, 2) get to dispute anything they want off the bill, 3) don't pay any type of fee. And the merchants don't drive payment options ... they simply accept what consumers provide. Also, IMO, the moment fraudsters target Dwolla, is the moment Dwolla realizes that a 2-7% transaction fee is necessary to stay in business.
  - dethink 15y ago
    Consumers pay the fees. Just not directly.
    - icebraining 15y ago
      Costumers don't pay fees for having a CC. They pay fees because CCs exist, regardless of whether they have one or not. Which means using Dwolla or a CC is irrelevant in that regard.
      - breck 15y ago
        Many PoS merchants also now charge surcharges for using cards. (which I admit for a merchant only makes financial sense if you underreport cash on your taxes--otherwise it seems the costs of handling cash coupled with lack of reporting is drastically more than the interchange).

mcv 15y ago

I love these kind of projects. We desperately need independence from the Visa/Mastercard monopoly over international transactions.

suivix 15y ago
Except that dealing with the Dwolla people is far worse than Visa/Mastercard.
- dethink 15y ago
  Can't be worse than PayPal. Depositing 2k, then spending none of it and withdrawing it 2 months later might be odd. Either way, sending a photocopy of your ID is not unreasonable.
  - suivix 15y ago
    It's very unreasonable since they deposited the money and had zero transactions. Dwolla got the money from their bank account, and my parents wanted to send it back to the same account. It's even more unreasonable since they gave no notice that there was a hold on the withdrawal.
- mst 15y ago
  So far all I know is that in your opinion, in one specific instance Dwolla behaved in a manner that you believe was worse than how Visa/Mastercard would have behaved. Every company has the occasional unsatisfied customer.
kahawe 15y ago
Let's just start with lynching paypal first before we move on to those two that are actually offering a usable solution.

suivix 15y ago

My parents put $2000 in a Dwolla account, did nothing with it, and two months later decided to withdraw it. Dwolla put a hold on it for over a week without any notification, and my father finally decided to call. On the phone they said 'well you know, $2000 is a lot of money'. My parents had to send over scanned photo identification just to get their money out. Anyways, what I learned is that Dwolla's customer service is terrible. I don't recommend it to anybody.

antidaily 15y ago
Sounds like Neteller or something. Remember them?
- nixarn 15y ago
  I had to use them at one point. Never again!
davidandgoliath 15y ago
So because Dwolla's customer service tried to protect your parents, they're horrible? Just curious. I used to think my bank was evil because they'd process every check manually adding delays -- but it's saved me in a few fraud cases. (They're still evil for many other reasons though)
- breck 15y ago
  > So because Dwolla's customer service tried to protect your parents, they're horrible? This is a common marketing lie. This actually isn't trying to protect his parents. This is greatly inconveniencing his parents in order to protect themselves in a cheaper fashion. Preventing theft is hard. Preventing theft while not punishing users is extremely hard. And so lots of banks and services take the easy route: forcing complicated passwords, OTP's, holds, "sitekeys", security questions, et cetera. True protection would be: "Behind the scenes we are going to do everything we can stop thieves. And, in the very rare cases where they succeed and access your account, we'll cover it 100%. And, we're not going to make you stab yourself in the eye every time you want to create an account, or send, receive or withdraw funds." Then it's up to Dwolla to build in strong defensive and offensive measures to combat online thieves, without making 99.9% of its users suffer for the 00.1% of people that are looking to steal. tldr; these "security measures" absolutely suck and I can't wait for the service that comes along and says "we did the hard security work so you don't have to". P.S. Dwolla looks awesome. I signed up. Am very impressed. I realize EVERYONE has these PitA security measures and I'm sure the Dwolla guys hate them just as much as me and have plans to eliminate them eventually. I just had to respond to the marketing bs.

vsl2 15y ago

I wish him well on his endeavor because I'm not a fan of CC fees, but from a consumer standpoint, I don't see any benefits. CCs provide (i) a line of credit, (ii) fraud protection, and (iii) rewards/bonuses. All of these can be incredibly valuable, particularly (ii) - you never appreciate the no-liability fraud protection of a CC until you discover how difficult it is to deal with situations in which your bank account is affected. If credit cards were not already the dominant electronic payment mechanism (i.e. VISA/MC were just starting like Dwolla is), Dwolla could possibly win out because businesses could refuse CC's. Not going to happen now, at least with regards to business-to-consumers. And I don't think most B2B transactions were conducted through CC's anyways. They seem to be doing okay now, but I don't see any secret sauce that's going to make them anything more than a fringe player in the payments industry.

yalogin 15y ago
Yes. The fraud protection and line of credit are valuable to people but why is that linked to the processing fee and network? Those features are provided by the bank which only provide them irrespective of the network your purchases are processed on. That is the key. The main advantage with a card is you can pay with it anywhere in the world. That kind of scale takes a lot of time to achieve and that is the reason the whole ecosystem is milking users.
nickik 15y ago
Isn't it really easy to steel somebodys card? Isn't credit card theft a big problem in amerika? Dept cards are protected with a code so there not that easy to steal. Im from europe and this is just how it is in my view of the Amerika but I draw my knowlage from movies and stuff so correct me.
- jedbrown 15y ago
  It's easy to steal a card, but the card companies do pretty good fraud analysis and in any case, the card owner is never responsible for the fraudulent charges. Of course the cost of the fraud monitoring and insurance system are passed on to merchants and those who carry a balance. But if you don't carry a balance, there is no question that a rewards card is the best available payment mechanism. If you use something else, you are subsidizing those who use rewards cards.

kayoone 15y ago

In Germany (and most of europe) credit cards arent used very much. I can wire transfer money inside the country for free, i can pay in alot of Online Shops by direct debit who get the money directly from my bank account. In stores i use a card associated with my bank account (not a credit card) to pay which also lets the merchant get the money directly from my bank account. I am suprised that the US doesnt have a similar system, no wonder everyone uses credit cards there. Thats also why i think Square wouldnt be very successfull over here.

ebzlo 15y ago
We can use debit cards here as well, the reason we generally don't are usually because of the security and benefits (mileage) you get from using a credit card.
- pedrolll 15y ago
  We don't have to use any kind of cards in Finland, and I think the situation is the same in Germany. I can directly pay a merchant and the money is transferred from my bank account without having a card at all. I can use a credit card as well, or a debit card, but there really is no point to use them here. It's surprising how far behind the U.S. is in this matter.
  - jrockway 15y ago
    Why do you say "far behind"? I can go into pretty much any store in the world and bust out a piece of plastic to pay for the purchase. And I get frequent flyer miles.
    - vidarh 15y ago
      Presumably because this article presents Dwolla as something new and fantastic, when it's something that's available in most European countries in one form or another right now. (and of course the experience from Europe is that while it competes with debit and credit cards, it kills neither)

bryze 15y ago

It really surprises me how many nay-sayers have posted negative comments, here. Bottom line is that, because of the popularity of paying with credit cards, merchants have to pass on the cost of transaction fees to consumers. Consumers pay. Will your reward points make up for the increased prices that you unwittingly pay? I doubt it. Even if Dwolla isn't the one to do it, toppling credit card profits is in everyone else's interest.

smackfu 15y ago
Why are merchant credit card fees somehow different from all the other costs that merchants silently pass on to the consumers? Costs that the merchants choose to pay in order to get more sales?
- nickik 15y ago
  The are diffrent because the can be avoided easly. Visa/Mastercard are not really doing much but the suck lots of cash out of the real economy and you think thats fine because other people/things suck out money too. We should the consomer keep paying for this when it can be avoided. If there are other silent cost you too should do a start up to help avoid those.
kahawe 15y ago
I don't see giving direct bank account access to any third party plus from my own customer point of view, both VISA and Mastercard have worked well for me in pretty much all situations in a lot of different countries all over the world. If it can bring down the credit card transactions costs then great but other than that, I see no reason to move to bitcoins or dwolla because I see not a single benefit for me. Maybe it is great for you USA hackers but here in Europe... shrug.

pitdesi 15y ago

This is interesting. I really like Dwolla as a company and the ambition, and think the are executing well, but there are some things you should know. 1) Most Americans use credit cards because they need the credit. That is something that won't be solved. Many of us also like the benefit of rewards (miles, dollars, whatever). To get payers on board, you need credit, rewards, and exclusivity (i.e. is this the only payment method available at somewhere where I want to shop). The last 2 meaningful companies were paypal and discover card. PayPal had millions of Ebay sellers using PayPal AND they initially paid people to become members. Discover card started the cashback movement and was the only electronic payment option at Sears (largest retailer in the world at the time). 2) Due to the Durbin amendment (which went into effect October 1st of this year), debit card cost to a FeeFighters merchant for the average transaction in the US is about $0.25. (http://feefighters.com/durbin http://feefighters.com/durbin). They now cost 22 cents plus 0.05% of the transaction. The reason that I mentioned a FeeFighters merchant is that most processors do NOT pass through the savings to the customer, you only get that with interchange-plus billing (which only about 10% of merchants are on, mostly big merchants). 3) Doing some quick math, that $350 million in transaction volume gets them to $175,000 in revenue per year ($350M/$500 transaction size)*$0.25 = $175,000. Still, they have a fantastic opportunity and I for one am rooting for them. Ben has the same roots as FeeFighters (had another company, was pissed off at how much he was paying in processing fees). He chose to tackle it a different way, one that is probably harder to execute on but can make more change in the long-run. Having met him, I bet that he didn't quite say the words in that headline.

cynicalkane 15y ago
Credit cards right now are used by a lot of people because they're the best payment option. Easy to use, limited risk of loss to theft, many offer cash back or airline miles. They can also be used as a source of payday/personal loans, but that strikes me as suboptimal. Justifying the existence of credit cards as a source of credit doesn't make sense. One, why must the credit be tied to a card? Two, how often is a responsible spender gonna need that card as a lender of last resort? In fact, the idea of a "charge card" predates the idea of attaching a revolving line of credit to one, and you can still get charge cards from American Express, among other firms. The only argument in favor of credit cards is the freedom-oriented one that people should be free to have easy access to run up revolving debts. I'm fine with this argument, but let's not obscure the issue by pretending that a significant number of people actually need access to that credit and that they need it in card form. The utility of credit cards lies in making payments, not having credit, and they're clearly an inferior solution--the space is ripe for disruption.

rcraft 15y ago

I'm using Chase QuickPay to pay my rent. No fees for either of us and it works great, I don't even have a Chase bank account, but quickly set up an account and linked it to my BofA account. Only problem is I believe the daily limit for payments is $2,000. From this example, clearly some banks are figuring out how to sidestep the credit card companies and provide value. How would this and other similar products like the ING product not be serious threats to Dwolla?

mahyarm 15y ago
Issuing banks (the bank name on your credit card) get the majority of the credit card fee revenue, visa/mastercard and the requesting merchant bank get considerably less.
- rcraft 15y ago
  Chase QuickPay has nothing to do with credit cards. I'm under the impression its all ACH transfers linking my checking account (at bofa) to my landlords (at chase).

feralchimp 15y ago

The 28-year-old in the story is a sympathetic protagonist, and gives the venture plenty of indie cred, but let's all take a moment to reflect on the fact that he's only being allowed to do this because one of his primaries is an entrenched inside player. He managed to pitch someone one layer deeper inside the onion of oligarchy, and those folks decided the glass slipper fit. Anyway, well played, sir.

kfcm 15y ago
Agree. After all, he did have another, non-tech $1MM/year business. Suppose his banker was just going to blow him off when he approached with this idea? Personally, I think this is Wells Fargo (and maybe a couple others) outsourcing the development of a new payment system/network.

Ezku 15y ago

Link to TFA on one page without the fluff: http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/11/10/businessinsiderthis-28-year-old-is-.DTL&type=printable http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/11/10/...

underwater 15y ago

I'd never written a cheque until I moved to the US; I was pretty shocked at how backwards money transfer is here. In Australia, BPAY (http://en.wikipedia.org/wiki/BPAY http://en.wikipedia.org/wiki/BPAY) is pretty much how all utilities and services are paid for. Transactions between individuals are usually via standard wire transfer and are free, and often instant.

miles_matthias 15y ago

I got the opportunity to listen to Ben speak at Startup Weekend Des Moines and I have to say I'm really impressed with him. Regardless of Dwolla's future (personally I think they will transform the industry), Ben is a shining example of working hard and being a successful entrepreneur in a place that really isn't very supportive of people who think differently. There are now a few legitimate VCs, college courses, and frequent startup events in the Des Moines area and every single person I've talked to gives a lot of credit to Ben for helping that grow. Des Moines even just recently launched one of their first incubator programs (Startup City) and is seen as a legit player in the Silicon Prairie. My team at Startup Weekend Des Moines (Fundle.co) revolved does group payment systems and Ben brought his team from Dwolla to meet us and offer their expertise for coding the backend payment processing part of it. Even if they don't kill the credit card, Dwolla deserves a lot of respect for helping to jump start the entrepreneur community there.

kin 15y ago

As a customer, I prefer: http://venmo.com http://venmo.com Lets me easily pay my friends and vice versa, 100% free, no transaction charges. Funds get pulled out of my credit card like a regular purchase (OR out of debit card or checking if preferred) Funds paid to me get automatically deposited into my checking account. Usage is effortless. They make money by charging a percentage on transactions that businesses receive.

rmc 15y ago

Where we've seen a ton of transactions right now is with people paying monthly rent. I don't understand this. Perhaps it's an American thing, but here in EU, I just put my landlord's account numbers into my online banking and I can transfer them money for essentially free. I even set up a standing order so it'll pay the same amount at a fixed day per month. I don't have to worry about paying rent. How does a landlord accept money via their credit card?

Lexarius 15y ago
For reasons unknown to me, the local property oligopoly accepts debit/credit rent payments only through an outsourced web service which charges $50 per payment. Perhaps they've convinced the property owners that they have a patent on paying rent online or something. Maybe there's some sort of risk involved. Maybe there's some sort of arrangement with credit card companies to discourage people from earning reward points on their rent every month. My bank's website doesn't list the company as one that it knows how to pay bills for, and wants you to send them a copy of the physical bill to get it added (there are no "bills" for the rent, so nothing to send). A direct transfer might be possible, but they don't seem to be advertising their account number.
- bdonlan 15y ago
  Every bank I've ever tried bill pay on (ING, Bank of America, E*Trade bank, Citizens Bank, Kennebunk Savings Bank) offers an option where you simply enter the account number and bill address, and they cut a check for it. No hassle. Maybe try some other bank, then?
itsnotvalid 15y ago
If somehow I can check exactly who send me the money it would be great, however times are, banks don't always show you who is sending you money in the statements (at least happen to me with my non-EU non-US bank). If one uses such service, the statement would have clear indication of who makes the transaction and would be much more traceable.
- 15y ago

tlrobinson 15y ago

I did a double take when reading this line... "The only fee would be if someone paid you. We take a quarter. We really want that quarter. It's all we want!" He should probably say "25 cents" instead of "a quarter".

jerfelix 15y ago
25 cents. 25 percent. whatever. we really want that quarter. That's pretty funny.

EREFUNDO 15y ago

Maybe the current downturn (bankruptcy filings, closing of CC accounts)is forcing people to start using cash instead of credit. I am a cash person myself, but asking people direct access to their bank accounts would be a hard sell, at least with credit cards there are many situations where they would allow chargebacks. They will have a niche market of cash based merchants, that is for certain. But it is way too early to say that their system can make credit cards obsolete within the next few years. Credit cards are just becoming popular in emerging markets where eCommerce is relatively nascent. The real issue now is securing cross border and long distance payments, being able to provide an unprecedented level of security demanded by the globalizing peer-to-peer and business-to-business transactions.

kahawe 15y ago

While it sounds great that someone is taking a stab at making transferring money easier and cheaper, they are clearly missing a few crucial points. First, they are complaining credit card companies charge them for their service - on the other hand, those companies do have costs for building and maintaining their systems and all costs that come with it. We will leave the question whether their prices are reasonable or fair aside for now. Another benefit I get from CC transactions: when I send money to the wrong person or got scammed, I can just have VISA cancel it and I get my money back. In the good 10 years I have been using my own CC(s) I needed to do that maybe 2 or 3 times and it worked absolutely flawlessly. You cannot just cancel a bank transaction and get your money back like that. Also, wiring money abroad is going to be a much bigger problem for them. But there is a far more fundamental flaw in their logic: > "We think, in the long term, sending money should be as easy and effortless as finding a friend on Facebook." The reason anything money-related is so over-regulated and cumbersome and full of regulations and bureaucracy is not just "the man keepin' ya down, bro" and neither is it only stupid people who only try to come up with empty regulations to bill you. All that is in place to fight against money laundry and help make it more difficult for worldwide organized crime to make easy use of their illegal cash. The very reason you can not just send money as easily and effortlessly as friending someone on facebook is: if you could, your first customers would be organized crime. They cannot wait for new possibilities to launder money easier and faster. I am wondering how they can be moving 50 million a week without all sorts of agencies cracking down on them? This has got to be heaven for small and big time drug (or weapons, humans) sellers as of now. So ultimately, it makes me sad this doesn't look like a promising replacement for the paypal overlords.

lhnn 15y ago

>Can users only send money to Dwolla members? No, 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.... LOLWUT In other words, you must have an account to receive money. Technically different, but that is some lawyerspeak if I've ever heard it.

nl 15y ago

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 "been surprised at the conversion" when someone is sending you money?! I think that's pretty much the ultimate dream - one customer paying another person to sign up!

eduardordm 15y ago

Well, dwolla is a credit card company. I'm a CTO (and co-owner) of a medium-sized credit firm in Brazil (full stack: processing, credit, gateway, etc). We offer plastic cards, iOS & android apps, NFC, IVR calls, web app, e-CPF (Brazilian electronic "social security" card) as form of payment methods. Guess what? Most people WANT the damn card. We would LOVE not to spend 1.4 U$ on every card we have to manufacture. I don't see Dwolla as the future of payments, they offer a limited solution. My company is planning for a future where there will be many ways to make a payment, fit for every social class and/or preference. In brazil, it takes 3 minimum payments to buy a smartphone. In the US, 49 million citizens are poor. Let's not deny the economic reality we are living in right now.

jaggederest 15y ago

I just want to find his PR agent/agency. I've seen this story in 8 different outlets and forums over the last little while.

ricardobeat 15y ago

There's a lot of talk here on how credit cards trump every other form of payment, on credit lines and rewards. Americans love their cards: * 1.4 billion credit cards held by U.S. consumers * Average credit card debt per household with credit card debt: $15,799 * Total U.S. consumer debt: 800 billion (down from ~1 trillion in 2008) Yeap, look at that debt, credit cards are amazing. Let me put my f___ the system hat: 1. $2 trillion in transactions per year. 2. Merchants pay between 2-4% in fees for every transaction Many people seem to forget about the second - "I'm not paying any fees" :/. That means around $40 billion in fees per year. A few billion short of the national budget for the US Department of Education. I really, really doubt it's costing all this money to send and track (mostly virtual) money around. And we haven't taken into account the late fees (around $20b/year), overcharge fees, annual fees, banking fees and others. Credit cards are just money harvesting machines. Why exactly do we need a third-party to handle our payments? Banks own our data and most of the infrastructure. Electronic payments should be part of the basic account package. "Reward" cards are just another marketing gimmick to get you to use more cards. /hat off Cutting myself short, I'm extremely excited with what Dwolla/Square and others are doing. It's 2011, I want to make payments with my eyes!

yason 15y ago

In Finland, account-to-account wire transfers are practically free and there are two internet buying options in general use that rely on them alone. First, most internet shops can do what the mail order companies have done for decades: they send you the product along with a bill that you can pay with a wire transfer. These days it means you go to you internet banking site and issue the transfer directly from your account to the merchant's account. Second, a majority of big merchants provide "internet banking payment" where the merchant's site is linked with the top ten major banks' internet services. From the merchant's site you choose your own bank and they will redirect you to the online banking services of that bank, along with the amount they want to charge and some other metadata. Now, your bank will ask you to login to your own internet banking account and use it to authorize a wire transfer for the given amount. After that's done (securely, on the bank's own website), the bank will redirect you back to the merchant's site, again with a token that the merchant's software can use to verify that the transaction went through. Also debit cards are in high use: they are usually free to obtain as well and it costs a merchant much less to charge a debit card than a credit card. This is sort of related because debit card transactions are practically just wire transfers. Some of them, such as Visa Electron, will actually require an online connection to your bank so that the balance can be checked prior to the wire transfer. It all comes down to the fact that Finland's banks have been historically well interconnected and they also have a long history of electronic inter-bank transactions. Wire transfers have been a commonly supported and cheap way to transfer money since the 80's: also private individuals can use them to move money to each other free of charge. Further, wire transfers are immediate between accounts in the same bank; between two different banks it takes one night to get them cleared.

latch 15y ago

"Our generation actually understands that when you buy sh*t, it comes out of your bank account and you have to pay for that." Money quote. Makes me want to work there. This is our generations equivalent of Jobs' universe quote.

davidcollantes 15y ago

When I use my credit card to pay what I normally have to pay for each month (groceries, utilities, etc) I get money back (yes, a check in the mail). Dwolla can't beat that. When I buy electronics with my credit card, I get an extra year of warranty, and buying protection. Dwolla can't beat that. When I travel, or rent a car, I get insurance coverage with my credit card. Dwolla can't beat that. When I buy anything with my credit card, and something goes wrong, I lose no money. None at all. Dwolla can't beat that. Long live, Credit Cards!