Dwolla, an alternative cash based payment network, enables consumers to make retail payments and peer-to-peer transfers over their hybrid ACH network. In June Dwolla launched their FiSync network which enables real-time bank transfers to Dwolla accounts, meaning users can connect participating bank accounts through their Dwolla account to make purchases in-store and online or transfer money right from their bank account with a flat fee for the merchant or receiver.
As a cash based payment network Dwolla accounts are stored value accounts where consumers can make payments with participating merchants in-store and online, as well as transfer money to other Dwolla accounts and set up recurring bill payments. Dwolla describes itself as a hybrid ACH network and consumers can only fund and withdraw funds from Dwolla accounts using their bank accounts. The value of Dwolla is that consumers and merchants can send and receive payments between Dwolla accounts instantly for a cost of only 25 cents to the merchant or receiver for transactions over ten dollars, while transactions under ten dollars have no fee. But to load or withdraw from the Dwolla account a consumer or merchant faces a two-to-five-day waiting period with the transfer to or from their bank account. In June Dwolla turned on their real-time bank transfer network, FiSync, to make the load and withdraw process from Dwolla accounts instantaneous with participating financial institutions.
The FiSync network addresses the weaknesses of the ACH network, it’s a real-time network processing transactions 24/7. Dwolla users that are clients of financial institutions that have fully integrated the FiSync network can transfer funds between their bank accounts and Dwolla account instantly. This means consumers can spend money in their bank account via their Dwolla account with merchants online and in-store that accept Dwolla, as well as for bill payments and money transfers. Currently Veridian Credit Union, in Dwolla’s home state of Iowa, is the only financial institution fully integrated with FiSync, but more are onboarding in the coming months and Dwolla has made FiSync freely available for financial institutions and service providers to integrate, which also offers interbank transactions with comparable costs to traditional ACH.
Before the recent launch of the real-time FiSync bank transfer network Dwolla was recognized in the market as a potentially disruptive player in the payments space receiving millions in funding from venture capital firms as well as from actor Ashton Kutcher. But enabling consumers to make payments directly from their bank accounts with real-time connection of the Dwolla account to a consumer’s bank account via FiSync will make it an even more viable competitor and alternative to the traditional payment networks. Priced at a max of 25 cents per transaction there is incentive for merchants to adopt and accept Dwolla payments, and as more banks integrate FiSync more consumers will have a viable way to make payments directly from their bank account. As financial institutions cut debit rewards programs and even charge consumers debit card fees, the underbanked will find alternative ways to make payments online and in-store from their bank accounts. As more banks integrate with FiSync the Dwolla payment network will continue to grow as a viable alternative for accepting and making retail payments and transfers.
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