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Des Moines, Iowa-based payment startup Dwolla has made a name for itself by taking on the shortcomings of the payment industry. Now the company is addressing what it calls one of its own shortcomings, namely that, whether online or off, both consumer and merchant have to use Dwolla to make a transaction happen.
"(T)his 'secret handshake' mentality has become a pain point for our business trying to sell something and a consumer wanting to acquire something," said Jordan Lampe, Dwolla's director of communications, in a company blog post. "Our job is to find and remove those pain points that get in the way, even if it's us."
To fix the problem, Dwolla did something characteristically different: It eliminated altogether the need for the consumer to have a Dwolla account. Now, non-Dwollans can make a one-time payment for a purchase from a number of Dwolla online partners without having to sign up, link accounts, or take any other steps normally required to register for an account.
To pay with Dwolla, non-account holders simply select Dwolla to pay, which takes them to another page where they fill out information about their financial institution. Once that's done, they're routed back to their shopping cart to complete the transaction. It's still secure, as it relies on Dwolla's secure network, and it's about as quick as filling out credit card information.
The upshot of the move is that Dwolla as a money transfer network is separated from Dwolla as a payment type. In other words, it doesn't matter anymore if a consumer is a Dwolla customer; it only matters that the customer is choosing to route a transaction down Dwolla's network — which is what Dwolla really wants.
For the merchant, getting customers to use Dwolla as a payment method makes perfect sense. Transactions of less than $10 are free for the merchant; if greater than $10, they cost only $.25 apiece. But why would a consumer choose Dwolla to pay, especially if they're not an account holder?
That's the second part of Dwolla's new plan: the Dwolla Price. Dwolla merchant partners share a portion of the savings they accrue by not having to pay standard transaction fees. While it's not a huge amount — one-half of two to three percent — it's still a savings over traditional payment types.
Partners working with Dwolla on the new effort include a number of payment platforms and small online merchants such as ZooZ, SureDone and PayTap.
Making POS possible
It's not just online merchants who are getting attention from Dwolla. The company also announced an API that simplifies paying at point-of-sale terminals. Now merchants can have their POS terminals "push" a payment notification to a Dwolla account holder. The consumer then need only authorize that payment in the app — there's no need to open the app, select a merchant and enter a dollar amount — it's already been done by the merchant's POS.
Cash register app Change and tablet-based POS solution ShopKeep have both integrated this new Dwolla API.
For more stories like this, visit the mobile/virtual wallet research center.