Dwolla is an online and mobile payment system. But unlike other digital payment services, it lets any person or business with internet access to send and accept money without the interchange fees and waiting periods that come with using a credit or debit card.
But how did Dwolla manage to pull it all off? And what is Dwolla exactly and how does it work?
How it all began
Ben Milne and Shane Neuerburg set up Dwolla in 2008 in Des Moines, Iowa. Their mission: to make it possible for anyone with an internet connection to exchange money but skip the interchange fees.
The idea was actually inspired by Milne’s firsthand experience as a merchant. Milne used to own a speaker-manufacturing company, selling units via a website. What frustrated Milne was that, for speakers purchased online with a credit card, he had to give up a percentage of the payment to credit card companies. And those interchange fees would amount to $55,000 annually.
To turn his idea into a legally viable venture, Milne brought in two investors: Veridian Credit Union and The Members Group. Dwolla relies on the former for banking services, while the latter specializes in processing transactions.
After raising enough funds to build a payment network, Dwolla was officially launched in the United States in 2009. From $50,000 a week, the company was already moving $1 million per day by July 2011.
How it works
Dwolla’s success is brought in part by the simplicity of its services. Basically, Dwolla allows you to transfer money to or from your bank account.
You can do this for free if the transaction amounts to $10 or less. If it’s more than $10, the flat rate is a minimal $0.25. So whether you’re moving $11 or $1,100, the fee is only $0.25.
The recipient, by default, pays the $0.25. But the sender can opt to shoulder this.
To initiate a transaction, you need to have a Dwolla account. Once you are registered at Dwolla, you can send money to phone numbers, e-mail addresses, Facebook friends, Twitter followers and LinkedIn connections. Of course, you can also make payments to businesses that accept Dwolla.
A notification will then be sent to the recipient, who must sign up with Dwolla to accept the money.
All this can be done in any of the following ways:
- Logging into Dwolla online
- Downloading Dwolla for iPhone from the App Store
- Downloading Dwolla for Android from Google Play
- Setting up a Dwolla Merchant Kiosk or a Dwolla-enabled POS
How it’s used
So when and where can you use Dwolla? In almost any scenario! In fact, Dwolla is popular not just with individuals but also among developers, non-profits, schools, CSAs and businesses.
Dwolla works with hundreds of merchants, so if you walk into a store that accepts Dwolla, you can simply pay in real-time with the Dwolla app on your mobile phone.
Merchants, in turn, can add a “Pay with Dwolla” button on their website and customers can simply click on this to make a payment. They can also use Dwolla’s free Hub page, install a plug-in that integrates with an existing shopping cart tool, direct customers to an offsite checkout gateway, or build a custom experience with OAuth + RESTful API.
Dwolla has also been a big hit with tenants and landlords. Tenants pay their monthly rent via Dwolla, with some even using the recurring payments options. Landlords get to collect rent, homeowner’s association dues and security deposits without having to deal with paper checks.
And in case you need to pay out as many as 2,000 people all at one, Dwolla has a mass payment tool that lets you do just that, saving you a lot of time and money in the process.
Dwolla is unique and innovative. Some say it is disrupting, in a good way, the U.S. online and mobile payment infrastructure. But one thing’s for sure: Dwolla is an easier, faster, safer and cheaper alternative that’s worth trying.
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