Dwolla the Iowa-based real-time payments company, has been on something of a tear recently.
Yesterday BBVA Compass announced an agreement that opens its technology platform to Dwolla, allowing customers of the bank to use the Iowa startup’s real-time network to make money transfers.
In late September, Dwolla, announced an investment by
He created a payment network that allows any business or person to send, request and accept money over an internet connect — free if the payment is less than $10 and $.25 for other transactions. That’s 25 cents, not 25 dollars. Now it has more than 500,000 participants — Milne said the figure is some months old but they aren’t reporting anything more current.
“You can send money to someone even if they don’t have a Dwolla account. But, they will need to create one to claim the funds. Businesses need to set up a Dwolla account to accept Dwolla,” the company explains on the Dwolla web site.
BBVA Compass and Dwolla looks like a good match. BBVA Compass is probably the only U.S.-based bank (its parent company is BBVA based in Spain) to replace its core banking system with the real-time Alnova system from
”The deal makes BBVA Compass the largest bank to partner with Dwolla, a nimble alternative to the current payments networks that are decades old in some cases, far from real-time and more expensive to use. It also makes BBVA Compass the only major bank to open its platform to such an extent to digital developers, its first such move inspired by the open standards that pushed forward other industries. BBVA Compass sees the agreement as indispensable and timely given its transformation to a digital bank amid rapidly changing consumer habits.”
The aging U.S. ACH payments system a 40-year old relic that takes days to process payments, is under review by the Federal Reserve Board and the Federal Reserve banks with a study and recommendation promised by year’s end.
Fed payments officials have said that the report will recommend a new payments infrastructure, which many of the country’s largest banks have opposed as an expense with no ROI. The Fed has also talked of taking 10 years to make the transition, which some have said is far too long given the pace of technological change. The project has received a kick in the pants by reports showing that more than 20, perhaps 36 depending on who’s counting, countries have real-time payment systems, including Mexico.
Meanwhile the nation’s largest banks are at last beginning to move.
“On October 22, TCH and its Owner Banks announced plans to undertake a multi-year effort to build a real-time payment system to better meet consumers’ and businesses’ expectations in an increasingly digital economy.”
With its agreement with Dwolla, BBVA Compass shows it isn’t content to wait.
“Dwolla, and its real-time payment infrastructure, is leading the modernization of the payment process, and we expect their technology to accelerate our own vision for banking in the digital age,” said BBVA Compass chairman and CEO Manolo Sánchez.
“The market is waking up to real-time,” said Dwolla’s CEO, Milne. “It’s wonderful to see people saying we are going to build a real-time system, and we have already built one.”
Chad Ballard, director of innovation and mobility at BBVA Compass, said the bank envisions opening up its Dwolla connection to both consumers and businesses.
“This fits our strategy of digital transformation,” he added.
In its announcement, the bank said:
“The partnership will allow for BBVA Compass account holders, in the first quarter of 2015, to make real-time payments to each other in a way that's safe and as fast, direct and transparent as email. Dwolla’s proprietary architecture and tools allow any business, organization or individual with a U.S. bank account to move money at a cost that cannot be matched by traditional networks (transactions more than $10 cost a flat fee of 25 cents, while anything less is free).”
In the first stage, BBVA Compass will use Dwolla’s FiSync protocol “designed especially for banks and credit unions to move funds for BBVA Compass customers to anyone through Dwolla's real-time network. This will be particularly useful for startups, enterprise companies and small businesses looking for a quick, inexpensive way to handle disbursements or B2B payments.”
Milne said that the financial institutions which are providing streaming payments today will have an advantage in the future when the American payments systems moves past its existing batch ACH processes.
