For historical reasons, ACH is approximately as fast as airmailing someone money. When all the stars line up correctly, it is as fast as Fedexing money. Credit cards are like emailing money (and Paypal was, very explicitly,about emailing money). Dwolla is based on ACH.
There's probably a lot that can be done with cheap, user-friendly ACH in an API, but I don't know if folks really understand the "Your transaction takes 100 hours to settle" bit.
I organize conferences (Strange Loop, Clojure/West). I pay at least $10 per person in credit card fees (multiply by 500-1000 people). Personally, having the transaction clear a few hours later is hugely unimportant to me vs paying $10 less per transaction.
I think they try to get around this by allowing you to 'preload' your account. What they've built is an electronic checking account.
I only write checks to pay my rent and I don't carry cash. If I had to get cash, I couldn't. I don't know the pin numbers to my debt or credit cards. This is something I would use if I knew more people accepted it and I didn't have to divide transactions between a credit card and this. I'd miss the cash back on the CC side though.
Yup. Further complicating things, ACH isn't truly settled for a 6 months!
ACH's can be charged back for 180 days and there is no adjudication process, like with credit cards. If an ACH gets charged back, you lose the money, that's it.
The other major complication with ACH is that most Americans use credit cards for the credit (70% hold a balance). That is something that won't be solved. Others 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).
ACH's are essentially free - there are some costs but Dwolla is part-owned by a credit union which probably helps lower the costs. They have major fraud-related costs, but given that fraud under $10 should be very small, their costs aren't much
Because it is tied to the checking system, where checks were routinely flown across the country from bank to bank before they could be settled? (Even after we had electronic systems that should make this unnecessary?)
Based on our collective confusion it is clear that the number one obstacle to using Dwolla is their own web site. When the "how it works" page starts with "First there was bartering, then there was coinage, and of course paper tender followed with checks right behind." I'm fading fast.
I want a description of how a transaction goes down. I got that you set up Dwolla by attaching to a bank account for ACH. I got that you use your phone--somehow. Can anyone explain the somehow? How about sending cash to a friend, is there any online demo of the interface for that?
I'm actually feeling physically uncomfortable trying to decipher their website. It's making me nervous and frustrated. I just want to know what the user experience is for making a payment. Do they have to pull out a credit card? Create an account? ARGH.
I want to know this too. Also, does the consumer have to deposit money into a Dwolla account before buying things? Can devs use there api with checking account and routing numbers so that Dwolla is invisible to the user? Is there a delay before payments post?
For a company that I'm entrusting my money to, they could really use a full-time designer on board to keep their site looking trustworthy. The obvious spacing issues even just on their blog post is really off-putting.
I've been following Dwolla for a while now, and I think this is a good step for them. I still have two big concerns, though:
1. Credit cards. Consumers like using them--they offer something that debit cards don't: an "undo" option. Dwolla seems to have gone all in on pleasing merchants, but I think there are still huge barriers to get consumers to use their service. What's the value proposition? Why should I deposit money into a Dwolla account when I can just swipe a card?
2. This might seem petty, but their site needs a re-design. When it comes to payments, your site needs to inspire confidence and trust. Compared to Square [1] and Stripe [2], Dwolla's blog and main site all look like amateur hour. Until recently their developer docs consisted of stickies in phpBB-esque forum.
Can't see the phpBB-esque forum, so I'll have to take your word for it, but I'm interested in hearing what elements of their current homepage seem amateurish and what you think they're missing that would inspire trust.
Tried registering - the 20 chars limit on their password field is not mentioned. For a company that should be aware about security implications, an upper limit should not be there.
Also, I connected my Facebook account from the start, so Dwolla should know my country of origin before my attempt to register. However, only when I got prompted for my address info (third screen) I saw the message "U.S. only...for now", but hey, my city name got filled in.
And before that I tried looking around, going to their Help section, searching - I found no mention of this US-only thing.
What I have never understood is how password length limits come into existence. Is there really some developer out there who things long passwords are bad? Are they using some sort of shitty technology that doesn't permit it for some reason and are too lazy to get around it? I just don't get it.
Ben isn't running a charity. If he thinks this strategy will help increase the user base, he could be right. The only problem is that if that strategy works, he'll be losing money on almost every transaction. (ACH transfers are cheap, but they're not free.) Dwolla also has pretty limited fraud detection at this point, and no bonds in most states to serve as nominal protection (see http://www.facecash.com/legal/brown.html). So at some point the price will need to rise again.
If the strategy does not work, then this will just hasten the company's demise. There's a remote chance it could help catalyze an acquisition, but that's really remote.
I then thought for a minute that perhaps this was a step toward operating legally in states like Pennsylvania (see http://www.thinkcomputer.com/corporate/whitepapers/heldhosta...), which waives its money transmission regulations only if you do not charge a fee (a la Venmo), but since you'd have to pay a fee at $10.01, that doesn't make sense.
So honestly I'm not sure I get what's going on here.
So "it's a network" is your clue to working out how they're being 'acquired' and by whom. I'm going to go with integration in to Facebook because I have absolutely no clue ...
Also, ACH transfer fees are presumably set by the bank at the terminal ends of the transactions and so are likely, IMO, to be varied if the bank thinks that they're being exploited to avoid other types of payment fees.
It's a tech/UX/product demo. Consumers outside of startup Valley aren't going to understand the concept or remember the silly name. If Dwolla succeeds, it will be getting bought and helping deploy the next iteration of online bill pay, which is exactly what dwolla is.
Exactly. If you have a business model where Dwolla being free is integral to your success, then you're in a very bad place. Always assume you'll have to pay your suppliers/service providers, and keep a healthy margin on top of that to protect yourself from price fluctuations.
For a more concrete example, look at Chargify. For a while they were free to anyone under a certain size. Then, they changed their prices and started charging $39/mo (originally it was $99) for the lowest tier. A lot of hackers got burned by that move.
1) How it works: Dwolla works by leveraging the Automated Clearing House (ACH) system. But to do that, you have to link your Dwolla account to a checking account. The ACH system is not the credit card system, so it can avoid the requirement to pay a toll, and thus can avoid passing on those fees to their users.
2) How is it different? Dwolla doesn't charge a percentage of the transaction. They only charge $0.25. And now $0.00 for transactions under $10.
2) Probably a lot to begin with. There is a perceived "security" in using cards online (thanks to years of marketing and PR by issuers, authorisers and gateways).
However, running Dwolla side-by-side with a card solution - with the reduced price option - I think it will be surprising to see how many customers start to see Dwolla as the favourite.
The trick is to create that difference for customers to see. And remember... just because your cost per transaction may go down, doesn't mean your prices have to! Why not use it as an opportunity to stick card fees on top?
I'm sure that will give customers plenty of incentive to the point where it makes no sense to use a full-time payment gateway... just stick Paypal's 'free' web payments solution on there to catch the drifters
What's the quickest way to load funds to a Dwolla account?
If you already have bitcoins, then you simply trade them for USDs on an exchange such as Intersango.com or MtGox. Then withdraw those USDs to your Dwolla account and the funds are available for spending right away. From bitcoins to Dwolla USD, in a matter of minutes -- even including the time it takes to sign up for Dwolla!
If you don't already have bitcoins, you can probably find someone willing to trade their Dwolla funds for your PayPal funds. The #bitcoin-otc marketplace has traders who have Dwolla USDs but for whatever reason need to move those funds to PayPal. Oftentimes they will accept a 1:1 trade (e.g., your $50 PayPal buys $50 Dwolla USD.)
http://bitcoin-otc.comhttp://webchat.freenode.net/?channels=#bitcoin-otc-foyer
Based on earlier comments by their founder, I imagine it's only a matter of time before they compete directly with credit cards using NFC. He's suggested that their goal is to compete directly with credit card companies like Visa.
Dwolla is currently making most of their revenue and customers from large landlords on rent payments. If Dwolla can produce an NFC badge or keychain (until NFC catches on in more phones) and can somehow become synonymous with NFC payments before the credit cards become big there, then I can see a huge market opening up for them. Vendors hate transaction fees and customers love convenience.
Does anyone know how hard it is to spin up a service like this on their own? Given they use relatively cheap ACH transfers, wouldn't you just need to find a bank that manages the money for you, and the rest is just doing a bunch of those ACH transfers?
Also, I'm not very familiar with US banking system, but it seems as Dwolla can withdraw funds from your account after you "verified" the account. It's a pretty common thing in Germany, but I have never heard of that in the US. Can any business do it or is it a Dwolla-specific thing?
I run FaceCash, which is based on accounting software I already had started writing ten years prior to starting in with payments. It's pretty difficult. Between the technology, regulatory and accounting hurdles, it's not a business for the faint of heart.
Practically, you've got to groom relationships with banks, convince them of your risk management process, get a decent rate for transfers, and a whole host of other details.
It can be done, but I'm not sure it can be done profitably for $.25 a transaction to the general public, especially with the risk management and the potential for returns coming back after 6 months.
I like what Dwolla is doing, but unfortunately without a faster way to move money out of Dwolla (transfer to PayPal, debit card, etc.) it's pretty useless for me right now.
The devs have told me that's completely against all they stand for, blah blah, but I think if they're trying to take down PayPal and the credit card companies they really need to budge a little bit to make the transition more palatable. I don't mind eating transaction fees until I can get some clients to use it.
Since Dwolla funds are kind of like cash, it is much easier to move them to something like PayPal.
This conversion happens frequently on the #bitcoin-otc marketplace as those selling bitcoins end up with excess Dwolla USDs. At the same time, there are others needing Dwolla USDs to buy Bitcoins, and will pay using PayPal USDs.
Is Dwolla a competitor to https://www.simple.com/ ? I'm not sure exactly what their service does - I know it's different than paypal and google checkout from previous articles. Can you use it to pay at brick and mortar stores like a debit card? It seems like it would only be useful if all merchants already accept it. Am I missing something or can someone explain it to me better?
[+] [-] patio11|14 years ago|reply
There's probably a lot that can be done with cheap, user-friendly ACH in an API, but I don't know if folks really understand the "Your transaction takes 100 hours to settle" bit.
[+] [-] puredanger|14 years ago|reply
[+] [-] noahc|14 years ago|reply
I only write checks to pay my rent and I don't carry cash. If I had to get cash, I couldn't. I don't know the pin numbers to my debt or credit cards. This is something I would use if I knew more people accepted it and I didn't have to divide transactions between a credit card and this. I'd miss the cash back on the CC side though.
[+] [-] djb_hackernews|14 years ago|reply
[+] [-] unknown|14 years ago|reply
[deleted]
[+] [-] pitdesi|14 years ago|reply
The other major complication with ACH is that most Americans use credit cards for the credit (70% hold a balance). That is something that won't be solved. Others 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).
More details and discussion in a previous article: http://news.ycombinator.com/item?id=3238880
ACH's are essentially free - there are some costs but Dwolla is part-owned by a credit union which probably helps lower the costs. They have major fraud-related costs, but given that fraud under $10 should be very small, their costs aren't much
[+] [-] 1010100101|14 years ago|reply
[+] [-] dmethvin|14 years ago|reply
I want a description of how a transaction goes down. I got that you set up Dwolla by attaching to a bank account for ACH. I got that you use your phone--somehow. Can anyone explain the somehow? How about sending cash to a friend, is there any online demo of the interface for that?
[+] [-] pakeha|14 years ago|reply
[+] [-] mattmiller|14 years ago|reply
[+] [-] plusbryan|14 years ago|reply
[+] [-] derekdahmer|14 years ago|reply
[+] [-] morrow|14 years ago|reply
http://www.youtube.com/watch?v=Zbf24_PTyx8
[+] [-] rgarcia|14 years ago|reply
1. Credit cards. Consumers like using them--they offer something that debit cards don't: an "undo" option. Dwolla seems to have gone all in on pleasing merchants, but I think there are still huge barriers to get consumers to use their service. What's the value proposition? Why should I deposit money into a Dwolla account when I can just swipe a card?
2. This might seem petty, but their site needs a re-design. When it comes to payments, your site needs to inspire confidence and trust. Compared to Square [1] and Stripe [2], Dwolla's blog and main site all look like amateur hour. Until recently their developer docs consisted of stickies in phpBB-esque forum.
[1] https://squareup.com/ [2] https://stripe.com/
[+] [-] wwweston|14 years ago|reply
[+] [-] budu3|14 years ago|reply
[+] [-] thorax|14 years ago|reply
[+] [-] bad_user|14 years ago|reply
Also, I connected my Facebook account from the start, so Dwolla should know my country of origin before my attempt to register. However, only when I got prompted for my address info (third screen) I saw the message "U.S. only...for now", but hey, my city name got filled in.
And before that I tried looking around, going to their Help section, searching - I found no mention of this US-only thing.
[+] [-] burgerbrain|14 years ago|reply
[+] [-] thinkcomp|14 years ago|reply
Ben isn't running a charity. If he thinks this strategy will help increase the user base, he could be right. The only problem is that if that strategy works, he'll be losing money on almost every transaction. (ACH transfers are cheap, but they're not free.) Dwolla also has pretty limited fraud detection at this point, and no bonds in most states to serve as nominal protection (see http://www.facecash.com/legal/brown.html). So at some point the price will need to rise again.
If the strategy does not work, then this will just hasten the company's demise. There's a remote chance it could help catalyze an acquisition, but that's really remote.
I then thought for a minute that perhaps this was a step toward operating legally in states like Pennsylvania (see http://www.thinkcomputer.com/corporate/whitepapers/heldhosta...), which waives its money transmission regulations only if you do not charge a fee (a la Venmo), but since you'd have to pay a fee at $10.01, that doesn't make sense.
So honestly I'm not sure I get what's going on here.
[+] [-] pbhjpbhj|14 years ago|reply
Well the clue appears to be:
"Dwolla is not a feature, it’s a network… And on Dec 15th… Nothing will be more obvious." (from http://blog.dwolla.com/on-december-15th-dwolla-will-change-a...).
So "it's a network" is your clue to working out how they're being 'acquired' and by whom. I'm going to go with integration in to Facebook because I have absolutely no clue ...
Also, ACH transfer fees are presumably set by the bank at the terminal ends of the transactions and so are likely, IMO, to be varied if the bank thinks that they're being exploited to avoid other types of payment fees.
[+] [-] gujk|14 years ago|reply
[+] [-] MicahWedemeyer|14 years ago|reply
Exactly. If you have a business model where Dwolla being free is integral to your success, then you're in a very bad place. Always assume you'll have to pay your suppliers/service providers, and keep a healthy margin on top of that to protect yourself from price fluctuations.
For a more concrete example, look at Chargify. For a while they were free to anyone under a certain size. Then, they changed their prices and started charging $39/mo (originally it was $99) for the lowest tier. A lot of hackers got burned by that move.
[+] [-] vinhboy|14 years ago|reply
Someone at Dwolla should make a nice infographic explaining it. And a chart comparing Dwolla to paypal, google checkout, etc...
The 25 cents flat fee is the big selling point, but its well hidden in the support page.
[+] [-] hugs|14 years ago|reply
2) How is it different? Dwolla doesn't charge a percentage of the transaction. They only charge $0.25. And now $0.00 for transactions under $10.
[+] [-] mc32|14 years ago|reply
[+] [-] noahc|14 years ago|reply
Oh, but what about scale? What if I'm processing 1MM a day? You negotiate a new fee because you're xx% of their business.
For the little guys it's not worth the hassle, for the big guys it's probably easier just to call them.
[+] [-] ebaysucks|14 years ago|reply
This way you'd spend over 3 minutes trying to save $0.25
[+] [-] smackfu|14 years ago|reply
1) As a consumer, if I see a Dwolla payment option and a Paypal payment option, why would I pick Dwolla?
2) As a seller, if I only have a Dwolla payment option, how many sales would I lose?
[+] [-] simonhamp|14 years ago|reply
However, running Dwolla side-by-side with a card solution - with the reduced price option - I think it will be surprising to see how many customers start to see Dwolla as the favourite.
The trick is to create that difference for customers to see. And remember... just because your cost per transaction may go down, doesn't mean your prices have to! Why not use it as an opportunity to stick card fees on top?
I'm sure that will give customers plenty of incentive to the point where it makes no sense to use a full-time payment gateway... just stick Paypal's 'free' web payments solution on there to catch the drifters
[+] [-] sgornick|14 years ago|reply
That's called offering a cash discount.
[+] [-] kgtm|14 years ago|reply
> Currently yes. We are exploring which market to enter next :)
Not a criticism, just a heads up for developers not targeting solely USA clients...
[0] http://getsatisfaction.com/dwolla/topics/do_my_users_need_to...
[+] [-] sgornick|14 years ago|reply
If you already have bitcoins, then you simply trade them for USDs on an exchange such as Intersango.com or MtGox. Then withdraw those USDs to your Dwolla account and the funds are available for spending right away. From bitcoins to Dwolla USD, in a matter of minutes -- even including the time it takes to sign up for Dwolla!
If you don't already have bitcoins, you can probably find someone willing to trade their Dwolla funds for your PayPal funds. The #bitcoin-otc marketplace has traders who have Dwolla USDs but for whatever reason need to move those funds to PayPal. Oftentimes they will accept a 1:1 trade (e.g., your $50 PayPal buys $50 Dwolla USD.) http://bitcoin-otc.com http://webchat.freenode.net/?channels=#bitcoin-otc-foyer
[+] [-] nchuhoai|14 years ago|reply
http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/11/10/...
[+] [-] billswift|14 years ago|reply
[+] [-] mncolinlee|14 years ago|reply
Dwolla is currently making most of their revenue and customers from large landlords on rent payments. If Dwolla can produce an NFC badge or keychain (until NFC catches on in more phones) and can somehow become synonymous with NFC payments before the credit cards become big there, then I can see a huge market opening up for them. Vendors hate transaction fees and customers love convenience.
[+] [-] dholowiski|14 years ago|reply
[+] [-] nchuhoai|14 years ago|reply
Also, I'm not very familiar with US banking system, but it seems as Dwolla can withdraw funds from your account after you "verified" the account. It's a pretty common thing in Germany, but I have never heard of that in the US. Can any business do it or is it a Dwolla-specific thing?
[+] [-] thinkcomp|14 years ago|reply
[+] [-] wiredfool|14 years ago|reply
Practically, you've got to groom relationships with banks, convince them of your risk management process, get a decent rate for transfers, and a whole host of other details.
It can be done, but I'm not sure it can be done profitably for $.25 a transaction to the general public, especially with the risk management and the potential for returns coming back after 6 months.
[+] [-] jarin|14 years ago|reply
The devs have told me that's completely against all they stand for, blah blah, but I think if they're trying to take down PayPal and the credit card companies they really need to budge a little bit to make the transition more palatable. I don't mind eating transaction fees until I can get some clients to use it.
[+] [-] sgornick|14 years ago|reply
This conversion happens frequently on the #bitcoin-otc marketplace as those selling bitcoins end up with excess Dwolla USDs. At the same time, there are others needing Dwolla USDs to buy Bitcoins, and will pay using PayPal USDs.
[+] [-] gonehome|14 years ago|reply
[+] [-] thinkcomp|14 years ago|reply
Simple provides an alternative on-line banking front-end through agency agreements with banks.
Dwolla provides a mobile payment service and Bitcoin routing services.
[+] [-] gonehome|14 years ago|reply
[+] [-] epscylonb|14 years ago|reply
[+] [-] jpdoctor|14 years ago|reply
Why a payment company would spend time on a currency with built in deflation is beyond me. You might as well go do a payment-in-gold startup.
[+] [-] hugs|14 years ago|reply
[+] [-] ars|14 years ago|reply
[+] [-] treelovinhippie|14 years ago|reply
I'm in Australia, any way to easily/cheaply open a US bank account?