Dwolla Corp. is celebrating the one-year anniversary of its national rollout by permanently waiving its transaction fee for small-ticket purchases and funds transfers.
Des Moines, Iowa-based Dwolla eliminated a 25-cent transaction fee for purchases that are $10 or less, the company announced Dec. 1. The fee remains for transactions exceeding that amount, Dwolla says.
The company believes the fee’s removal will entice more small merchants to use the service, says Brian Day, Dwolla product leader for The Members Group consulting firm in Des Moines.
Dwolla expects to lose a component of its revenue by eliminating the fee, but the company will announce its strategy to offset the loss soon, Day says.
“Dwolla examined its business model and decided it didn’t make sense for small merchants to pay 25 cents on a $2 cup of coffee,” he tells PaymentsSource.
The Members Group, a subsidiary of the Affiliates Management Co., distributes Dwolla’s product to credit unions.
Dwolla integrates with social networks Twitter and Facebook to enable users to send and receive funds from their social media pages. Users who buy products from merchants accepting Dwolla can share purchase and location information with their social networks.
Dwolla also offers banks an integration service called FiSync provided through a technology partnership with The Members Group, which enables them to provide direct funds transfers from bank accounts without the need for a preloaded Dwolla account.
Some 95% of Dwolla’s users are consumers, but the company is seeing increased merchant adoption of its product to accept for good and services.
“As the word about Dwolla has gotten out, we’ve seen more consumer and merchant growth,” Days says. “Both sides see the value proposition the service offers.”
Dwolla can attract more businesses such as coffee shops and other mom-and-pop establishments to use the service instead of those merchants relying on traditional payment card acceptance, Day believes.
Even with the Durbin amendment capping debit card interchange, merchants still could pay high fees for small-ticket transactions, Day noted (
“Dwolla is looking to attract those small-ticket merchants because we feel it’s an important merchant segment,” he says.
Dwolla continues to pick up steam with credit unions.
UNI Credit Union of Cedar Falls, Iowa, and WV United Federal Credit Union of Charleston, W.Va., recently signed agreements with Dwolla to integrate FiSynce into their online banking portals (
Day anticipates more credit unions to add Dwolla as their plans for 2012 become clearer.
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