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Dwolla Bank To Bank Transfers Let Companies Get Paid Without Credit Card Fees

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Dwolla, a payment network that allows individuals and businesses to send, receive and request payments for free over the ACH network, has released a new white label API that provides the convenience of credit cards without their high costs by connecting directly to bank accounts. It charges for the API service.

“There’s no shortage of people frustrated by expensive transaction fees who want a simple way to move money between accounts,” said Ben Milne, founder and CEO of Dwolla. It could be a manufacturer who wants to pay its box supplier, or young people wanting to pay one another. They could use the branded Dwolla platform.

The Dwolla branded platform has been adopted by artists, governments, utilities, manufacturers and the CME, said Milne, to do hundreds or even thousands of transaction.

“Over the  years we have had a lot of success helping people use the Dwolla-branded platform, but we have found that while we have built a great bank-to-bank infrastructure, businesses don’t necessarily want to use our brand.”

Dwolla lets business pay thousands of suppliers or employees at a time.

“When they are paying tens of thousands, they want their own brand on it, and that is where we see them adopting this white label API functionality.”

Sweep, for example, is an app that launched at Money2020 to help millennials save money in designated buckets, like for a home or wedding. It uses Dwolla’s white label ACH connection to let users make regular, automatic transfers from a checking account to a savings account. Unlike Simple or Moven, Sweep is not tied to a bank, so it needed a way for users to move money from checking at one bank to a savings account at another bank or credit union.

““Unfortunately, our ideas were too new for the banks and traditional payments processors,” said Jackson Gates, co-founder and CEO of Sweep. “We considered building our own payments gateway but the banking relationship and compliance requirements would have blown up our roadmap and crippled our product plan.  We needed an innovative technology partner with a proven banking relationship.”

The company integrated Dwolla’s white label payments API to facilitate ACH transfers in around 40 hours and was testing live payments within days. By partnering with Dwolla, Sweep built upon Dwolla’s experience for managing the compliance, fraud, and security elements of its payments experience.

With enough time, said Milne, Sweep could have figured out how to do ACH payments, but the amount of time and number of people required would have been cost prohibitive.

“We got them to market faster.”

The white label API that Dwolla supplied to Sweep incorporates over 540 pages of ACH operating rules and guidelines and took Dwolla two years to figure out, added Milne.

“To send a bill for service is easy with a credit card but hard for a direct bank transfer,” he added. “We want to make it easy for customers.”

Companies can use Dwolla’s white label API to debit and credit any bank account that uses ACH, which is all banks accounts in the U.S., Milne said.

Originally developed as a way for small businesses to receive payments without paying credit card and interchange fees, Dwolla was versatile enough to make B2B and P2P payments as easy as sending an email.

As it has matured, Dwolla has looked at ways to build more revenue, Milne said.

“We continue to build our free platform and sell the white label API to businesses who want to get into market quickly without maintaining infrastructure.” The company also has developed services to handle returns and corrections, and to battle fraud.

“Our technology is really powerful at getting money from A to B quickly and safely. A lot of business want to control their brand —we are seeing our API volume growing and think the off-site value through APIs will dwarf the onsite value. Since July, the demand for a more flexible, robust, and seamless ACH API has fueled our platform’s revenue growth by an average of 30 percent month-over-month.”

Dwolla also offers ways for companies, like utilities, to get permission from a customer to debit their account by a different amount each month, corresponding to their electric, water or phone service consumption. Or a rental car company might create an arrangement where a user is automatically billed, from his bank account, for the amount of gas needed to fill up a returned car. That’s easy to do with a credit card; Dwolla makes it possible from a bank account and avoids the card fees.

The platform plans to incorporate logic to protect the consumer, such as setting a price range for transactions between $80 and $100 and specify the day of the month for the payment.

“If you try to pull the money outside those parameters we can shut it down,” said Jordan Lampe, who is responsible for communications and policy affairs at Dwolla.

Unlike other services, the on-demand capability does not require platforms to sign up for an additional gateway or merchant account.

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