munKNEE.com Your Key to Making Money
Imagine that you could pay for a service online without accruing a mountain of fees. Imagine being a
retailer and having the ability to take your customer’s money – and keep all of it. Sounds impossible, doesn’t it? Well, now it’s not. Introducing Dwolla [- a better alternative to credit cards and Pay Pal for everyone involved, except the banks. Let me explain.] Words: 615
So says Melanie Epp (http://blog.yourmoney.ca) in edited excerpts from her original article*.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!) has further edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Epp goes on to say, in part:
Ben Milne’s company, Dwolla, has been called one of the top 20 most innovative startups in tech. [He was operating a successful business but, like with everyone else,]…every time a customer paid with their credit card, a percentage of the sale would be given up to the credit card company. [He] felt like they were stealing from… [him – he] was getting paid and somebody was taking money out of [his] pocket. With that, he set out to design a system that would allow the exchange of money, without the hefty fees.
What is Dwolla and how does it work?
Dwolla is a finance company, similar to Square and PayPal, but with Dwolla, payments come directly from the consumer’s bank account. Credit cards and debit are not used. Says Milne,
Because they don’t exist in the system, we don’t have to bring the fees into the system. You can spend any amount and when you do that, the person on the other end doesn’t have to pay 1, 2, 3 or 4%.
While related services, like PayPal and Square, are built on top of credit card networks, such as Visa and Mastercard, Dwolla is built on top of its own system. Customers pay $0.25 per transaction, which can be exceptionally moneysaving when it comes to larger transactions. Dwolla even offers mobile payment services and uses a GPS feature that allows customers to pay in real time. The system works similarly to Foursquare, but instead of checking in you can walk into the store and pay right from your phone…[Also,] money does not have to be sent [just] between Dwolla members – it can actually be sent to anyone. You can send it using their email account – you can even use their Facebook account.
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Is it working?
Milne says that Dwolla is moving anywhere between $30 million and $50 million per month…with the average transaction amounting to $500. According to Milne, Dwolla does pretty well in business-to-business, consumer-to-business and business-to-consumer transactions [with] person-to-person transactions currently amounting to 11% of their business.
My thoughts
While I don’t see Dwolla eradicating credit cards entirely, I do see it changing a number of things. Up until now, consumers without credit cards have been able to use PayPal, but at a hefty cost. That cost quite often deters consumers from purchasing products online. Dwolla may change that. Those who avoided fees can now shop without worrying about those extra costs. Similarly, banks charge fees for transferring funds and paying via email transfer – and much more than $0.25. Dwolla could change that too.
Conclusion
Keep an eye on Dwolla. I have a feeling they’re going to do big things.
*http://blog.yourmoney.ca/2011/11/28-year-olds-startup-company-could-save-big-money.html