This post was inspired by something my buddy Max wrote last week. I am in no way affiliated with Dwolla, and don’t get anything for writing this post.
By now I think there’s pretty widespread consensus that it’s time for a legitimate competitor to Paypal to emerge.
In 2000 when Paypal saw a huge rise in use and popularity to due to the online craze that was (and is) eBay, it was a game changer. It made it easy and secure for anyone to transfer money on the internet.
It was responsible for an extremely difficult task of getting the average public to be ok with sending money over the internet, and paved the way for every other e-commerce store on the internet today.
Those times have come and gone, and while nearly every single industry online has seen fast paced evolution, making sites and services better and better, Paypal has stood the test of time. Meaning, there has yet to be a legitimate competitor that makes it easy to transfer cash from one person to another.
Enter Dwolla. Founded in Des Moines in 2008 it’s the closest service I’ve seen that comes close to giving Paypal a run for it’s money.
The Beauty of Dwolla
Dwolla was originally created for one purpose, to easily transfer cash from one person to the other. With Paypal, you pay 3% on most transactions.
For every sale of Location Rebel for instance, I give them around $9. I’ve always been (relatively) ok with that, and chalked it up to the cost of doing business.
However, it really hit me how much money I was losing when our HDR photography site started doing well. My business partner Max and I were losing $30-60/month simply from Paypal transaction fees when we transferred money to each other. This continued to add up, especially as the site became more successful.
Then we discovered Dwolla. What’s the beauty of it? No matter how large the transaction is, the fee is only $.25. If it’s under $10, it’s free.
These days no matter how many thousands of dollars we bring in, the fee to pay each other is just a quarter.
If you’re doing business online, this is unheard of. However it works for them because they are a completely cash based system, and thus there are no credit card fees.
So far I’ve used it with Max, to pay some Location Rebel affiliates, and collect consulting fees. Over the past 6 months it’s saved me over $500 in Paypal fees.
I like it so much in fact, that I’m making it the primary payment method for my upcoming project Hacking the High Life, which comes out a week from today.
Other Reasons Why Dwolla is Great
This post was originally inspired by Max’s article, “Why the Dwolla Button Could Revolutionize Blogging“. What is the Dwolla button you might be wondering? Glad you asked.
Essentially it could be the first tool that that will make micropayments a reality both online and offline. Did you enjoy this article? Want to buy me a beer for helping you discover a cool new tool for your business?
Boom. Just like that you can pay people online, no fees, no charges, no hassle. To take it even further some bars in Iowa have it set up so you can pay for your drinks with a Dwolla app.
Not to mention you can setup recoccuring payments, and they have an API for developers.
The Downsides
There are still a few very notable downsides to Dwolla however.
First, it’s only in the U.S. right now, so if you’re across the pond, you’re still out of luck at the moment. There’s also the issue of user base. In a recent Twitter conversation my buddy Karol mentioned he loved the service, but didn’t know anyone else that used it, thus making it way less awesome.
However that’s what I’m trying to change with this blog post. I rarely will go so far as to write a whole post for a product or service, especially when there’s absolutely nothing in it for me. But I really believe in this company. I believe in the dire need for an alternative to Paypal, and I really think Dwolla could be the service to do it.
What do you think? Have you used Dwolla? Do you like it? Not like it? Tell us about it in the comments!
Join The Discussion
Sean,
Great post–I’d never heard of Dwolla! I will give it a look.
On another note, you should check out Venmo (venmo.com). Unless I’m missing something, I believe they do what Dwolla does, except it’s totally free (for ACH bank transactions, that is). Not that $0.25 is a lot for a transfer…
Cheers,
Mike
Great story. We love Dwolla also. Launching our next version of our ION Rewards, a digital loyalty, offers and rewards platform.
Check it out, Dwolla is embedded in the app as a payment option. Merchants will love it, obviously.
Digital redemption: offer on consumer smart phone, notifies merchant app on their tablet after going through Amazon’s cloud, merchant approves and consumer receives their reward, IONs. http://ionrewards.com/
Goes live in US on Friday.
Merchants can join the universe by signing up now:
https://ionloyalty.com/
Dwolla seems like a fantastic option; unfortunately it is still restricted to the US though – as and when (or if) they expand across North America and the wider world I’ve no doubt it will see greater adoption.
Sorry why did you no use the the gift transfer option if you work with the guy? Using the paypal gift payment option there are zero fees but there is zero protection.
Great blog.
I have a extremely small eBay business called Flea Bay Too where I sell for folks or when I find something of interest, I sell for myself.
For a year or two I have been watching the fees for both eBay and Pay Pal rise exponentially. The bottom started to fall out with both establishment when, first and foremost eBay informed (actually it was a forceful shove) me of their rate changes and bias acts towards the buyers verses the sellers. Then PayPal informed me after nine years of flawless business transactions that there would be a 21 day hold on my funds (due, they said, to some suspicious activity). Nothing had changed in my account, all transaction had be consistent for years. The hold came at a time were we really need the measly $140.00 and they would not release it. I called and made a valid and direct argument only to be met with slogans and jargon. In frustration I hung up and vowed to find and alternative. In comes DWOLLA. I signed up yesterday and I am chomping at the bit to get started. I hope the company stays strong and true to it’s base because I truly believe that they will become PayPal’s nemesis.
Thanks for the great blog spot and let us all try to spread the word.
Dew Drop
P.S. Has anyone ever wondered how PayPal’s founder Peter Thiel could fund the Dragon’s flight to the space station. Just imagine the interest that accrues with a 21 day old on millions of dollars.
Check out bitcoins also – its what made Dwolla what it is:
http://www.wesusecoins.com
+1
Integrating Dwolla now.
So many ideas… Thanks for this.
As the comments mention, I guess buyer protection is where a lot of Paypal’s money goes. With the rise of internet transparency though there’s no reason to finance so much uncertainty/flakiness protection.
As a buyer and a seller since 2001 buyer and seller protection has helped as long as you follow the steps. For example I purchased 3 Kindles from ebay but they were all listed as stolen with Amazon so I returned them to Amazon. Paypal requested an fax from Amazon stating that they were stolen but they had been recieved. So I got my money back. I am not at 2.5% isntead of 2.9 and I get 1.5% cash back when I use the paypal debit card.
I’ll be interested to see how they do. In 2000 there were a variety of competitors to paypal.com. I worked for one of them. We had a working system, but the money dried up and it is long since gone. Several that were still viable found themselves being used to fund terrorists for 9/11 and the field basically shrunk to one. Dwolla has a lot of catching up to do, and Paypal continues to expand into other areas. The one advantage they may have is in the small business market. Paypal is targeting corporate payment solutions so Dwolla may have a chance with the entrepreneurial crowd.
There’s an adoption hurdle for dwolla, certainly (I was motivated, so I didn’t mind the 4 business days it took to get approval). Adoption is growing, however.
They went from $1MM in transactions per month to $1MM transactions per *week* in 180(?) days. There’s NO large-scale advertising I can see anywhere beyond the traction they’re getting from the press.
I’ve worked with a lot of financial institutions, so I’ve seen the “also-rans” in this game…
Dwolla is here to stay.
I’d read an article about how Dwolla got started at Business Insider last year. It may be of interest to you:
http://www.businessinsider.com/this-28-year-old-is-making-sure-credit-cards-wont-exist-in-the-next-few-years-2011-11?op=1#ixzz1fMdttmEx
Hi Sean,
Before this post, I had never heard of “Dwolla”. This is really important information as you showed how much money you saved. Right now, I am not yet generating income with my blog but I plan to in the future. I will be bookmarking this article, as this is a big deal.
Amazon and Google offer user to user payment services as well people!
Thanks so much for writing this post Sean. My whole business is online- I do online cleanses and health coaching from a distance- everyone pays trough my website. I am losing lots of dollar bills and just signed up for Dwolla because my boyfriend- Peter Griffin who you met for a beer once- sent me this post. Thanks again!
I canceled my PayPal account and opened a Dwolla account late last year. I haven’t had time to use it yet, but I am planning an e-book launch for later this year and will be using Dwolla for a payment option. PayPal is horrible and I am glad to see a competitor that might give them a run for their money, literally. Thanks for writing about it!